The Problem of Double economic taxation of Distributed Profits and reform scenarios in russia

Abstract

The article is devoted to the research of economic and tax distortions arising from double economic taxation of distributed profits in the form of dividends to participants–individuals.The goal of the article is to develop approaches to the development of the Russian tax system. In order to achieve it, we summarize theoretical ideas of solving the problem and approaches of foreign countries. We also review the Russian context of taxation of dividends. The following features of Russian tax system are analyzed. First, distortion of tax regime in favor of debt financing of companies, and second, sufficiently competitive level of aggregate tax rate on distributed profits compared to developed countries. The presence of “debt bias” in the financing of Russian companies was revealed.The different scenarios of reform of the Russian tax system are analyzed. The authors concluded that feasibility of transition to capital taxation with two elements: (1) partial exemption of dividends from taxation at the level of individual (recipient of profits) and (2) harmonization of the dividend tax regime with income tax regime from capital appreciation.