Economical Sciences / 8. Mathematical Methods in Economics

Doctor of Economics Zhidkova E.Yu.

Stavropol State University

Ensuring Russia's economic security by improving fiscal arrangements

The formation of the effective mechanisms to ensure economic security is one of the most important tasks of the current public policy. The present stage of development of Russian economy is characterized by the growing role of taxes; the increase of their impact on economic processes, which has a powerful impact on all spheres of society [3].

According to a number of indicators of economic security that characterize the efficiency of tax mechanisms from the position of the development of innovation economy, Russia does not stand up to the standard ratios. This indicates a need for conceptual review of the principles and approaches to formation of taxation. Thus, the proportion of investments in the production of the country's GDP in 2009 was 17% when the specified value was 25%, moreover many experts noted that, in order to achieve the level of development of countries such as China, India, Singapore it is necessary to bring this figure up to 30-40%. The share of innovative products in the total volume of shipped products is around 5%, with the necessary level of 15 per cent. Ratio of 10% of the richest and 10% of the poorest people exceeds the threshold more than 2 times, etc. [8].

Many scholars asserts that the major obstacle to sustainable economic growth is the lack of a systematic approach and fragmentation of development of the Russian economy as a whole and the taxation system in particular. Therefore, the tax system had become one of the factors contributing the stagnationist processes in the economy and in conjunction with other factors has led to extremely negative consequences that points to the need for a reorientation of the Russian economy to more efficient and effective model of taxation.

In view of the above and taking into account the fact of lacking of holistic view on the most appropriate structure of the tax system under the prevailing conditions, in the theory and practice of the Russian reality the integrated studies of the tax relations with the new conditions of their manifestations become more and more important, as well as the methodology for assessment of economic security in tax matters, including the calculation of tax security in view of the proposed tax change that makes conditional the relevance of the selected topics.

In today's world, the nature of threats and their manifestations are constantly changing, but the role of taxes as a source of financial resources of the State budget, of course, remains the same and, moreover, intensifies. In addition, the role of the tax system grows in connection with the fact that it is practically one of the few remaining levers to regulate economic and social processes that can contribute the ensuring of the conditions for implementing simple and expanded reproduction on a technical-technological basis. [7].

Inefficient tax policies and shortcomings in the activity of the Government authorities contain a threat to economic security. At the same time the crisis of the State, the errors in economic policy and the general weakness of the State inevitably lead to a crisis of the tax system [6].

The existing problems of modern tax system are reflected in the indicators of fiscal security. The comparing of the actual values of the thresholds is presented in table 1.

Table 1 – The comparison of the actual coefficients of economic security in the tax sphere with their thresholds (for 2010).

	Indicators of economic security in tax matters	The actual value for 2010.	Threshold value	Deviations (+/-)
1	Tax factor income balance in society	17 times	8 times	9 times
2	Tax rate of equitable distribution of income of natural persons	30%	11%	-19%
3	Tax rate of investment security	20%	25%	-5%
4	Tax factor resource availability in the country	9%	20%	-11%
5	The effective tax rate	70%	40%	+30%
6	Adequacy ratio of tax revenue	60%	70%	-10%
7	Tax rate of the investment component of industrial production	7%	15%	-8%

As you can see, a comparison of the actual level of tax security with their thresholds indicated that most of the threshold’s values of indicators and, most importantly on investment in the basic capital, innovative component of resource supply and, consequently, on the most important social indicators the economy continues to be in the zone of danger that requires cardinal changes in the existing system of taxation.

The review and evaluation of existing relationships and dependencies between socio-economic indicators that affect the value of indicators of economic tax security will determine the range of necessary tax changes, letting the security tax indicators achieve their thresholds.

 The first of the indicators – the decile income differentiation coefficient characterizing the social tax security. According to Russtatistics its value for 2010. was 16.5 times. This means that the incomes of the richest 10% of the citizens of Russia exceed revenues of the 10% poorest in more than 15 times [9].
According to Russtatistics, on a share of 10% the richest citizens of Russia accounts for about 30 per cent of total incomes.
Statistical modeling of the relationship of bet of PIT (personal income tax) and incomes of the 10% richest citizens of the Russian Federation indicated that the connection between these variables exists. The correlation coefficient is ( -0.36) – a notable connection. You can say that the quality of the dependency was of practical importance, since the value of the coefficient of determination is 0.19, that demonstrates that changing the resultant characteristic (income of the 10% richest citizens of the Russian Federation) on 20% due to the influence of the factorial sign (rate PIT). (fig. 1)

 
 
  
  
  
  
  
  
  
  
  
  
  
  
 
 
 

 

Figure 1-the connection of bet of PIT and cash income of the 10% richest citizens of the Russian Federation
Give the interpretation of the result. An increase in rates on PIT for a group of citizens belonging to highly paid, would lead to a reduction in their income at 576 billion. rub. 
To calculate the predictive values of cash incomes of natural persons in the Russian Federation use linear trend (Figure 2)

 

Figure 2 - Linear trend (cash incomes of the population 
in the Russian Federation
Give the interpretation of the result. For this projection we should use linear equation, because in this case, the coefficient of determination will be 0.92. According to the forecast of monetary income of the population of Russia in 2012. will be 4772 billion. rub. (44512 billion. rub +3260 billion roubles).
The calculation of the tax factor income balance in society, with various options for reducing rates of PIT showed that for the threshold of this indicator must be on the wealthier citizens in Russia to increase the rate to 14% of PIT until the level 27% [5].
The second indicator of economic tax security is a “tax rate of natural persons’ income distribution”, calculated as the ratio of income to revenue CB (consolidated budget) of PIT, of the Russian Federation. To calculate the predictive value of income on the consolidated budget of RF PIT also use linear trend (Figure 3).
 

 

Figure 3 – The linear trend (income of PIT in CB RF
Give the interpretation of the derived result. For this projection the linear equation should be used, because in this case, the coefficient of determination is 0.96. Thus, according to the forecast revenues of PIT consolidated budget in 2012, will form 2166 billion. rub. (1986mlrd rubl. +180 billion. rub.) 
For the calculation of forecast income of consolidated budget of RF values let’s use linear trend (Figure 4)

 

Figure 4 – The linear trend (incomes of CB RF).
 Give interpretation of the result. For this projection the linear equation should be used, because in this case, the coefficient of determination is 0.95. Thus, according to the forecast revenues of consolidated budget in 2012, will be 20137 billion. rub. (18440 billion. rub +1697 billion roubles)
The calculation of the tax rate of personal income distribution for the various options for reducing rates of PIT showed that for the threshold of this factor the rate of PIT must be increased up to 27%.

The third of the factors of economic tax security is a “tax rate of investment security”. Investment resources of enterprises can be the borrowed and own sources of financing. One of the main sources of own investment resources of enterprises is the profit, which is largely dependent on the level of taxation [4].

Therefore, statistical modeling should be done, submitted by pair-wise correlation connection indicators such as tax profits and business fixed investment (Figure 5).

Figure 5 – the connection between tax rates and investment enterprises of the Russian Federation to the basic capital

The statistical modeling of the connections between tax rates and investment business fixed investment showed that the relationship between these variables exists. The correlation coefficient is (-0.66) – the obvious connection. You can say that the quality of the dependencies is of practical importance, since the value of the coefficient of determination is about 0.46, which means that changing of the resultant topic (business fixed investment to the basic capital) are almost 50% dependent on the rate of profits tax.

Tax rate of investment security is calculated as the ratio of business investment in basic capital to the country's GDP. To calculate the predictive values of GDP let’s use linear trend (Figure 6).

Figure 6 – The linear trend (GDP in Russia)
According to the forecast of GDP in 2012 will be 46736 billion. rub. (46 736 billion rub. + 4013 billion rub).
To calculate the predictive values of business investment in basic capital let’s use linear trend (Figure 7).

 

Figure 7 – The linear trend (business basic investment in Russia).
According to the forecast of business investment in basic capital in 2012 will be 10390 billion. rub. (95 17 billion rub.+873 billion rub.).
Calculation of the tax rate of investment security in the various options for reducing the rate of profits tax has shown that, in order to achieve the threshold of the rate of investment security it is necessary to reduce profits tax rate by 5% to 15%, respectively.
The next coefficient of economic tax security “tax rate of resource supply of the country”. 
The proportion of MET (Mineral Extraction Tax) total tax payments for the use of natural resources is quite large. In 2009 and 2010 it was more than 95%. The payments for total oil MET in 2009, accounted 89 per cent and in 2010 - 90% [1]. 
Oil MET is calculated in the light of two factors, C (b) and C (c). Data rates distort the actual size of the amount of Tax MET, taxed on each ton extracted oil [2].
 Calculate the size of the tax, clearing him from the influence of data conversion and do a statistical modeling of the connection of tax rate and income at MET in CB RF (fig. 8).

 

Figure 8 - The connection of the average rate MET in oil production and taking MET into incomes of consolidated budget of Russia Federation
Statistical modeling of relationship MET rates in oil production and proceeds of the tax in CB RF showed that the relationship between these rates is very close. The correlation coefficient is (0.99). A positive sign when the correlation coefficient indicates the direct link between these indicators, i.e. an increase in the rate of MET of oil to 1 rub. leads to increased revenue for MET in the consolidated budget of Russia to 0.5 billion. rub. To calculate the predictive values of income in the consolidated budget of the Russian Federation we use the  linear trend (Figure 9).

 

Figure 9 – linear trend (income tax MET in CB RF
According to the forecast the revenue MET to the consolidated budget in 2012 will be 2240 billion. rub. (2073 billion. rub +167 billion roubles).
Calculation of the tax factor resource supply for the various options for increasing the MET rates showed that for the value of this coefficient to reach its threshold it is necessary to increase the tax rate from 1 tons of oil up to 4 thousand rub.
The next coefficient is the tax rate innovation of industrial production, defined as the share of innovative products manufacturing industries in total throughout of the shipped product in %. To calculate the predictive values of shipped goods (works, services) on industrial enterprises we use linear trend (Figure 10).
 

 

Figure 10 – The linear trend (the volume of shipped goods by enterprises of manufacturing industries in Russia 
According to the forecast the volume of goods shipped on enterprises of manufacturing industries in 2012 will be 15860 billion. rub. (14537 billion. rub +1323 billion rub). 
To calculate the predictive value of produced innovative products (works, services) on industrial enterprises we use the linear trend (Figure 11).

 

Figure 11 – The linear trend (the volume of shipped innovative products, by enterprises of manufacturing industries in Russia)
According to the forecast the amount of shipped industrial products in innovation industries in 2012 will be 1091 billion. rub. (990 billion. rub +101 billion rub).
Innovation focus of the Russian economy is largely determined by the size of the funds allocated by the State budget, to create an extensive and efficient innovation infrastructure. The optimal value of such appropriations is 1.5% of GDP, but in the period of market transformations that proportion considerably declined [10].
 Increasing the costs of the State budget is determined by the level of its income. Therefore, statistical modeling of relationship revenue income of consolidated budget of RF and the volume of shipped goods to enterprises manufacturing innovative productions. The correlation coefficient is (0.98) – significant connection. Quality of dependencies was of practical importance, since the value of the coefficient of determination is 1, indicating that change the resultant attribute (volume produced innovative products manufacturing enterprises) at almost 100% due to the influence of the factorial sign (tax revenues of consolidated budget of RF (fig. 12).

 

Figure 12 – The connection of tax revenue of CB RF and volume of shipped innovation product by the enterprises of manufacturing industry of RF

Give the interpretation of the result. Increase in tax revenue of consolidated budget of the Russian Federation to 1 billion rub. will lead to the growth (shipped) produced innovative products to 80 million rub.

The calculation of the tax rate innovation of industrial production for the various options for increasing tax revenues of consolidated budget of Russia showed that for the value of this coefficient to reach its threshold, you must increase the income of the consolidated budget of RF at 8 trillion. rub that perhaps by increasing the rates of MET in oil production and introduction of progressive taxation on PIT.

Set tax indicator thresholds security before and after tax transformation is presented in table 2.

Table 2 - Summary table of comparisons of indicators of economic tax security with their thresholds as a result of proposed tax changes

№	Tax security indicators	The threshold for 2010.	Forecast for the actual value for 2012.
1.	Tax factor income balance in society	8 times	8 times
2.	Tax rate of equitable distribution of income of natural persons	30%	30%
3.	Tax rate of investment security	25%	25%
4	Tax rate of resource endowment of the country	20%	20%
5	Tax rate innovation of production	15%	15%

As you can see the value of actual indicators of fiscal security reached its thresholds, that reflects the effectiveness and timeliness of the proposed tax changes.

Having summarized all the results, we came to the following conclusions:

¾ Today, in the conditions of the increasing external and internal threats and dangers, as well as change in their forms, taxes and tax policies are becoming an integral part of economic security. Firstly, as the resource factor being in the hands of the State. Secondly, as a tool of influence to economic and social processes. Thirdly, as a factor based on State feedback and from taxpayers and regions;

¾ The comparison of actual values for the tax security and their thresholds indicators showed that the Russian economy continues to be in danger zone (the incomes of 10% richest citizens 16 times higher than 10% poorest citizens, the share of income tax and tax on mining in the State budget income is insignificant and does not exceed 10%, the share of innovative products in the total industrial production does not exceed 5%, etc.) that requires the cardinal changes in the existing system of taxation;

¾ Received correlative-regression connections between socio-economic indicators, involved in the calculation of indicators reveal security tax to improve the values shown indicators through changes in current tax system, in particular: reducing tax rates to the income at 5%, an increase in the rate in oil production from 1 tone to 4 thousand rub, an increase factored rates PIT proceeds the richest segments of the population;

¾ The proposed measures in the sphere of taxation will increase the income of the consolidated budget of RF and thereby ensure the growth of Government grants and allocations for the development of innovative enterprises, resulting the increase of the amount of product innovation of enterprises manufacturing production from 5% to 15%, which corresponds to international requirements and standards.

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