April 15, 2010
Renee DeGross Valdes, 404-413-1353
ATLANTA - When Russia implemented its flat tax structure in 2001, drastically slashing personal income tax rates, it was soon hailed by experts as an economic windfall for that country. But a study published by Georgia State University economics professors found that while the reform decreased tax evasion, it did very little to the increase in new economic activity.
For their groundbreaking work, Jorge Martinez-Vazquez, Regents' Professor of economics and director of the International Studies Program; Klara Sabirianova Peter, assistant professor of economics, and co-author Yuriy Gorodnichenko of the University of California at Berkeley, received Russia's first National Prize in Applied Economics for the best published research devoted to the Russian economy.
The 1.5 million rubles ($51,000) prize was established last year by a group of leading think tanks, universities, corporations, and others in Russia to promote analysis of their economy.
Their paper is entitled "Myth and Reality of Flat Tax Reform: Micro Estimates of Tax Evasion Response and Welfare Effects in Russia," and it was published recently in one of the top economics journals, the Journal of Political Economy.
"Our close examination of the effects of the 2001 Russia tax reform revealed a significant increase in reported income because of improved tax compliance but a very small increase in real productivity," said Martinez-Vazquez.
The award, which received wide attention in Russia, was presented to the winners on April 8. Yevgeniy Yasin, the former Russian Minister of Economy - now academic director of the Higher School of Economics and president of the Liberal Mission foundation, presented the award, with Sabirianova Peter accepting during a ceremony at the 11th International Conference on Economic and Social Development in Moscow.
"Russia's tax reform has important world-wide implications," Sabirianova Peter said, during her acceptance speech. "As of January, 29 countries had adopted the flat rate personal income tax, largely following Russia's lead in this type of reform."