Solidarity Tax as an Instrument of Interregional Redistribution of Rent Income in Russia

Abstract

Increase in rent relations contributes to the strengthening of interregional income inequality, since business entities appropriate the territorial rent in economically developed regions. Traditional income taxation instruments do not deal with the redistribution of territorial rent. On the contrary, such instruments, as the progressive personal income tax in Russia, can increase interregional inequality. Therefore, the presents study aims to substantiate the possibility of using a solidarity tax for interregional redistribution of rent income and develop the optimal tax model for current conditions. The article describes the solidarity tax from the perspective of rent taxation, determines its key features and methods of levying. To examine interregional income inequality, constituent entities of the Russian Federation were clustered using Ward’s method according to average monthly wages and the share of personal income tax in the regional budget. Each cluster is characterised by similar personal income and tax revenue. The solidarity tax burden will be on the regions of the first four clusters. It is proposed to levy the solidarity tax as a personal income surtax on a progressive scale, depending on the ratio of accrued wage of a taxpayer and the average monthly wage in Russia for the previous year. This approach will contribute to a smooth change in the effective personal income tax rate, as well as to at least 74% increase in subsidies to budgets to compensate for raising the wages of public sector employees. The developed proposals can be applied to improve the tax mechanism of redistribution of rent income. Future research may focus on developing alternative models of solidarity taxes, including for entrepreneurial and corporate income, in the context of the Covid-19 pandemic.