Tax, monetary and social effects of regulation of investment activity of citizens in Russia

Introduction

In modern conditions, the population is not only a consumer of society. The household sector performs socio-economic functions, in particular - investment-savings feature, which is one of the key terms of economic development. First, the size of the savings is one of the indicators of standard of living in the country. Savings have a clear social orientation, "stabilize" the household: they are formed with the aim of providing opportunities for children with a quality education, maintaining a comfortable level of consumption in retirement, the formation of a "safety cushion" in case of emergencies etc. secondly, savings serve as a resource factor in ensuring economic growth, restructuring and improvement of the economy: this is possible with the involvement of the resources of households in the reproductive process is the creation or development of business and investment projects ^{[1, p. 96]}. It should be noted that this function do exactly formal savings of the population that are classified as investments.

Implementation of the investment potential of the Russian population

In the structure of investment resources of Russia, the household sector has a high share (figure 1). However, during the period 2015-2019. it decreased by 18.6 p. p.: with 33,0% to 18.4%. The share of investment resources of the household sector has been relatively stable in the 2015-2017 period, and declined sharply in 2018-2019.

Figure 1 - Structure of investment resources for institutional sectors according to Rosstat, in 2015-2019.

Compiled by the authors: ^{[2, c. 16],[3, c.16]}

This dynamics is determined by a combination of factors, the key of which is an absence of significant positive dynamics of changes in real incomes (table 1). Despite the steady growth of per capita income, real disposable income in the 2015-2017 period tended to decrease, and in 2018-2019, did not grow as much in order that the public has the opportunity to transform them into investment resources. In fact, the savings of the household sector, which can potentially be considered investment resources represent a positive balance between income and funds aimed at current consumption. In recent years, the situation encourages people to apply to credit institutions to borrow funds to cover current expenses – in these conditions the size of savings and investment in particular does not increase. ^[4]

Table 1 – Dynamics of population incomes in 2015-2019.

Compiled by the authors at: ^[5]

The validity of this thesis can be traced when considering the indicators of the structure and dynamics of monetary costs and savings of the population (table 2). It can be seen that in Russia from year to year, the share of spending on goods and services, as well as mandatory payments that are classified as current consumption. The cost of acquisition of real estate has consistently decreased, but in 2018 showed strong growth, after which the figure stopped just short of the achieved levels. With regard to the incidence of the cost of acquisition of financial assets, it should be noted that during 2015-2019, they just fell to share of this expenditure has dropped from 15.2% in 2015 to 1.5% in 2019, these figures indicate that the population is experiencing difficulties in terms of availability of free resources for investment operations, which is a serious barrier to increase the investment activity.

Table 2 – structure and dynamics of the monetary costs and savings of the population in 2015-2019.

Compiled by the authors at: ^{[6, c. 166],[7, c. 158]}

Savings from the position of macroeconomic statistics (methodology CBR) usually considered in the context of the following types of assets: currency, deposits, debt securities, loans, shares and other forms of capital participation, insurance and pension reserves, accounts receivable and the accounts of escrow. The structure of assets of households by the end of Q2 2021 are presented in figure 2.

Figure 2 – the Structure of household assets on 01.07.2021

Compiled by the authors at: ^[8]

Savings of the population, along with the resources of institutional investors can act as a source of "long money" in the economy. However, about half of all the assets of Russian households are concentrated in the traditional instruments in the form of deposits (33%) and cash (17%). The proportion of shares and other equity, which include quoted and unquoted shares and units of investment funds is quite large and amounted to 36% at the end of the 2nd quarter of 2021, However, when considering the rate of growth of the amount of these types of assets (table 3) shows that the population is much more actively increasing its investments in cash and debt securities – growth in 2020-2021 amounted to 34.3% 37,0%, respectively, versus the rate of growth in the amount of 14.2% for shares and other equity. This fact points to the growing problem of insufficient accumulation in the economy long-term financial resources, which ultimately affects the level of credit exposure to investment projects.

Table 3: Dynamics of assets by types in 2018-2021 years.

Compiled by the authors at: ^[8]

Existing in Russia, the problem of enhancing the use of the investment potential of the population involves working in two directions. The first one is a creation of favorable socio-economic conditions conducive to the development of organized forms of household savings: guaranteed protection of long-term investments, the increase in the educational level of the population (financial literacy), the formation of positive public opinion in relation to investment instruments, including instruments of the stock market. The second direction is a tax incentives for the transformation of assets in the form of cash and deposits in shares and other equity on a long term basis. The requirement for long-term nature of savings derived from existing maturity mismatch investment base and the needs of the economy.

Today, Russia is implementing a number of programs to improve financial literacy, aimed at people of all ages: children, students, pensioners etc. Approved the national strategy for financial literacy 2017-2023 ^[9] the Program is focused on increasing population in investing in the stock market. Together with other factors, they gave a significant impetus to the development of private investment in recent years.

Table 4 – change in the number of active clients in the System of trading of the Moscow exchange in the years 2015-2021

Compiled by the authors at: ^[11]

From table 4 it is seen that the rate of increase in the number of active customers Mosberg (customers who have made during the month, at least one transaction) individuals who are, in 2015-2020 steadily increased, reaching 143,86% by the end of 2020, In 2021, the growth rate slowed, the peak of the "boom of private investors" was passed, however, were achieved another historic marker at 16 million accounts. To show how rapidly the development of the Institute of private investment, table 2 presents statistics on legal entities where 2019-2021 he retained a stable growth rate in the range of 6.40%-7,79%, which is substantially less than for individuals.

The system of tax incentives for investment activity of the population and its shortcomings

Currently, the system of tax incentives for long-term investment activity of the population actually represented by four instruments (table 5).

Table 5 – Types of tax incentives for private investors in Russia

Compiled by the authors at: ^[10]

Among these tools are the most common among investors of the benefits of IMS and the LDV and the most popular tax deduction in the amount of money deposited on IIS: the growth rate of the number of tax deductions over a number of years exceed 100%, and for 2019, the deduction of the stated 165 690 taxpayers (figure 3). At the same time, the tax deduction according to the IMS in the amount of positive financial result in 2019 has only been used by 169 people, LDV – 612 people. This allows us to consider the IMS as the main instrument of stimulation of investment activity of the population.

Figure 3 - Dynamics of the number of investment tax deduction in the amount of money deposited on IMS (PP.2 section 1 of article 219.1 tax code) in 2016-2019

Compiled by the authors at: ^[12]

The system IIS operates in Russia since 1 January 2015, a Key objective of its implementation was to stimulate long-term investments of individuals in the securities. Private investors consider IMS as an alternative to deposits. At the same time, IMS, unlike them, possesses one of the short transmission chains for the transformation of savings into real investment. However, despite double-digit and three-digit growth rate in the number of tax deductions for IIS, as well as a significant increase in the number of private investors in the stock market, there is a failure in the interest of the population data tools. At the beginning of 2020 account analogs IMS was opened with 16.8% of British citizens (Individual Saving Account), from 9.2 per cent of Japanese citizens (Nippon Individual Saving Account), in 37.5% of Canadians (Tax-Free Savings Account) ^[13]. In Russia, only 2.4% of the population is IMS.

However, we cannot say that the IMS in Russia unpopular – as evidenced by the dynamics of the number of IMS (figure 4). In 2018-2021. the number of open IMS has steadily increased, but the rate of growth has slowed: the growth rate in the 2nd quarter of 2021 compared to Q1 made up 7.89% is the lowest figure since the beginning of the functioning of the IMS in 2015. Dynamics of volume of assets similar. This suggests that the rapid growth of popularity of the tool will slow down.

Assets on IMS by the middle of 2021 made in Russia 454 billion rubles, which is about 0.5% in the structure of all assets of the population. In this regard, the monetary effect of the functioning of the IMS for the economy as a whole appears to be somewhat weak.

Figure 4 - change in the number of IMS and the amount of assets on IMS ^[14]

System IMS in Russia has its specificity (table 6). It is associated with the choice of option of a tax deduction of the two options provided by the tax code.

Table 6 – Main parameters of IMS in Russia, ^{[15, c.39]}

Select the type of IIS optional to implement when opening an account is possible at any time during the term of the contract, however, after the choice to change the deduction type is impossible. As for whether the choice of a particular type of deduction, it is determined by several factors: income, taxable personal income tax; frequency refill; preferences regarding the frequency of obtaining deductions; the availability of investment experience. IMS type-I preferred a private investor who receives income subject to personal income tax and has the confidence in receiving the income for 3 years. This type of account to a greater extent applicable with a conservative investment strategy: low risk appetite, a small number of transactions, long-term oriented investments. MIS type II allows you to receive tax credits to investors who do not have income subject to personal income tax (or income minimum). The motivation of using this type of account is a great for people with sufficient experience of investing, confident in the effectiveness of its investment strategy.

Based on these theses, it is possible to allocate significant drawback of the system IIS – account type II is more designed for experienced investors who tend to make a lot of short-term transactions, including derivative financial instruments. Therefore, this type IIS practically does not contribute to the solution of the problem of stimulating long-term investment in public securities, and is used for speculative strategies. This is evidenced by the relatively small amount of the claimed tax deduction: as mentioned earlier, in 2019, the deduction for the MIS type II said 169 people against more than 165 thousand people, said deductions for IMS type I.

For issues in the development of the Institute IMS indicate the results of the analysis of dynamics of the average size of IMS in 2018-2021 years (figure 5). With the growth in the number of open IIS and claimed tax deductions, the average size of the account in the framework of trust management is significantly reduced, the average account size in self-management of stable (with the 3rd quarter of 2020), but is extremely slow growing. It is not possible to speak about significant changes in terms of growth in long-term investments of citizens, despite the fact that the total amount of assets on IMS from year to year.

Figure 5 Dynamics of the average size of IMS ^[14]

In addition, there is the problem of empty brokerage accounts. According to the survey, the largest brokers, the proportion of individuals resident empty accounts during the second quarter of 2021, has increased from 60% to 62%, still about 19% of total assets in the account do not exceed 10 thousand rubles ^[16]. The share of empty accounts in a fiduciary capacity minimum: this fact can be explained by the presence of the greater part of the asset management agreements minimum threshold of investment (which tends to decrease). Regarding IMS managed independently, the number of empty accounts due to the imperfection of the tax system: the tax code does not prohibit the investor specifically to keep IIS empty, suggesting its completion at the end of the 3rd year of the account's existence – it gives the possibility of receiving a tax deduction with a minimum of distraction free cash. In this case, the investor, joined IMS, even for a few days before the end of three years, receives a tax deduction. The task of stimulating long-term investment in public again, not solved, because such a transaction can be called speculative.

Today it is clear that IMS could make a greater contribution to the development of long-term investments of physical entities. media materials of the Central Bank of the Russian Federation notes that the terms of the investment base and the needs of the economy do not match each other, because the investment horizon for a duration of 3 years (under IIS) is too short. The controller indicates the necessity of reforming tool. Currently, CBR presents "the concept of improving the mechanism of individual investment accounts to encourage long-term investment in the Russian Federation" ^[17]. It is developed based on the premise that the main barrier IMS for citizens is the lack of a plurality of accounts. According to CBR, the further development of the Institute of IIS must be associated with the creation of new IMS type-III. It is assumed that IMS new type will allow to solve the problem of tax incentives for long-term investment more efficiently through increased investment period, eligible for a tax deduction, up to 10 years: this term takes into account the duration of major infrastructure projects and the need for technological upgrading of domestic companies. It also assumes that investors will be able to access the IMS type-III simultaneously with the IMS type-I or type II, implementing the strategy of long-term and medium-term investment at the same time. It is planned to maintain a limit tax deductions for the amount of 400 thousand rubles, but with a sub-limit for each account type. Discusses the possibility of providing additional tax benefits under IIS a new type with the targeted nature of the costs: buying a first home, financing pension plans etc. CBR notes and restrictions need for a new type of account the proportion of high-risk assets, which would have saved citizens from excessive investment risks, which may impede the long-term transformation of savings into investments.

This strategy is likely to make a significant contribution to the transformation of the investment behavior of the population in the longer term. However, today there is no certainty as to what will be the IMS type III really is. In addition, the implementation of initiatives can be predicted by low demand from potential investors. The level of investment culture in the country is not sufficiently high, and the investment strategy of the citizens is long - term. Increase the time horizon to 10 years the population will be primarily associated with a high degree of uncertainty and significant risk, as well as a General lack of confidence. The increase in the degree of credibility of the tool is possible only through the solution of structural problems associated with a low level of protection of minority shareholders, a controversial law enforcement practice, etc.

The impact of investment tax deduction for personal income tax on monetary inequality

Consider the question of tax incentives for investment activity of citizens from the standpoint of the impact of monetary inequality.

In Russia since the beginning of market reforms for over 30 years, the issue of inequality of citizens in terms of welfare is very serious. The Gini coefficient, which shows the level of inequality that ranges from 0 to 1, where 0 is complete equality and 1 is perfect inequality reaches 0.43 during the last three decades consistently higher than 0.4. This situation could undermine the socio-economic stability and requires a response from the Government. According to the CIS, Belarus, he is 0.28, Ukraine and 0.26, Kazakhstan – 0,29 in Germany is 0.31, Poland – 0,28, the UK is 0.33, France – 0,29, Latvia and Lithuania – 0,36, Estonia – 0,3. ^[18]

President of the Russian Federation the need to address inequality and poverty raised to the rank of national priorities stipulated by the decree of the President of the Russian Federation from 21.07.2020 ¹474 "About the national purposes of development of the Russian Federation for the period till 2030", as well as the President of the Russian Federation to the Federal Assembly on 21.04.2021 ^{[19, 20]}. The security Council of Russia also considers these challenges key among the contemporary socio-economic problems of Russia. ^[21]

Income taxation in Russia has untapped potential in terms of smoothing the monetary inequality. The flat rate personal income tax, in force until 2021, has not helped to reduce inequality, but on the contrary, was a factor in aggravating it. The introduction in 2021 of a progressive scale, tightening net of interest income on Bank deposits of citizens first necessary but not sufficient steps of transformation of the income tax citizens in Russia from the standpoint of reducing the monetary inequality of citizens. ^{[22, p. 31]}

The system of tax deductions for personal income tax was also exacerbating inequalities citizens factor. Deductions were made item latent regression system of income taxation. Investment and property deductions received the most affluent citizens with funds for expensive acquisitions and long-term investment. The deduction for them meant a decrease in the average effective tax rate in contrast to the less well-off citizens, not having appropriate opportunities. Consider the static data on the dynamics of tax deductions for personal income tax and, in particular, investment deduction when you Deposit funds to IMS, which are presented in table 7. Indicators are calculated on the basis of tax reporting on Russia 1-DDK "On the Declaration of income of natural persons."

Table 7: the Dynamics of tax deductions for personal income tax 2015-2019

Compiled by the authors at: ^[12]

Since 2015, the number of recipients of the investment tax deduction under PP. 2, paragraph 1, article 219 of the tax code (if you Deposit funds on IMS) has increased almost 20 times from 8.7 to 165,7 thousand taxpayers, the amount of deductions also 20 - fold from 2.5 to 49.9 billion. Among all the tax deductions for personal income tax rate of growth of investment deduction on IIS as a new tool was the highest. Despite the significant positive trend, the share of deductions under IIS in the amount of investment deductions and deductions for personal income tax in General is irrelevant: to 3.21% in total investment deductions and to 0.64% in the amount of all deductions. The proportion of taxpayers who received deductions for IMS, also remains insignificant 1.95% in 2019. This confirms the relatively low demand for such deductions among taxpayers, the dependence on the limited material resources for long-term investments have a greater share of citizens.

Accordingly, the investment deduction IIS leads to a worsening of monetary inequality. Of course, with the introduction of this deduction, the objective was to stimulate investment activity of citizens, but to consider such an impact on inequality of this tax tool needed. It is obvious that in modern conditions of inequality in Russia, it is important to develop ways of improving item of income taxation, including deductions, making the hidden elements of the regression.

The amount of personal income tax which the taxpayer reduced by a deduction for IMS made in 2019 to 6.5 billion rubles, which is 0.16% of total personal income tax received by the consolidated budgets of the constituent entities of the Russian Federation. It also shows a slight tax effect of investment tax deduction in MIS from the standpoint of the size of budgets. However, for individual investors this tax effect can be significant in terms of enhancing the profitability of the invested funds compared to alternative investment directions.

Possible directions of development of the tax regulation of investment activity of citizens

The development of the tax regulation of investment activity of the population in part of IIS should be focused on several areas. First, it is necessary to popularize this instrument and greater credibility, including through work on the level of financial literacy of the population. Secondly, you should eliminate existing imperfections in the tax legislation. Thirdly, it is necessary to create a legislative basis for more long-term focus of investment behavior of citizens through the introduction of new instruments IIS and Refine existing ones. Fourth, it is important to consider the impact of income taxation on monetary inequality.

May be offered the following measures.

· Elimination of MIS type II. This type of account does not contribute to promoting long-term investments of citizens, does not meet the main goal of introducing the instrument IMS, the most effective trading strategies.

· Imperfection IMS type I, namely, the possibility of receiving a tax deduction for funding the account at the end of the third year of its existence. To MIS this type of decision tasks for the development of long-term investments of citizens and ensure the needs of the economy in the financial resources it is necessary that the funds were placed in financial instruments for at least three years. Moreover, as pointed out by the Central Bank of the Russian Federation, even the horizon of three years is too short for current realities.

· The introduction of the IMS type-III. Initiative CBR looks reasonable, but it requires serious work on both the approval settings account and create a positive investors ' expectations regarding its operation. The introduction of targeted tax breaks on the new IIS will potentially increase its attractiveness in the eyes of investors.

· Restrictions on the types of financial instruments on IMS. This direction is actively discussed in the scientific community. First, you need to consider the possibility of a ban on purchase of IMS shares of foreign issuers, as it is not conducive to the growth of the Russian economy. But keep in mind that a complete ban on their acquisition negatively affect the popularity of IMS. Second, restrictions may be imposed on the acquisition of OFZ and sub-Federal bonds, as these investments represent a financing deficit of the budgets of the Russian Federation and its subjects, and therefore does not contribute to the attraction of financial resources of the Russian corporations and financing their investment projects.

· To improve the tax deduction according to IMS, taking into account the need to reduce monetary inequality, it seems appropriate to further strengthen the progression rate personal income tax and the introduction of non-taxable minimum. However, it is also important to note that the latter will lead to increased regional disparities budget provision for income tax. This is due to the fact that the poorest in terms of income tax regions, a substantial proportion is just personal income tax, low wages, with the minimum wage and the introduction of non-taxable minimum of the personal income tax receipts in such regions will be significantly reduced.

Conclusion

In the structure of investment resources of Russia, the household sector is a significant proportion. However, the investment potential of citizens rather poorly implemented. It is necessary to stimulate investment activity of the population. Among the state instruments of stimulating long-term investment activity are some of the key tax tools. Most popular now a tax deduction for personal income tax in terms of the amount of money deposited on IMS.

Assets on IMS by the middle of 2021 made in Russia 454 billion rubles, which is about 0.5% in the structure of all assets of the population. In this regard, the monetary effect of IMS appears to be somewhat weak.

The amount of personal income tax which the taxpayer reduced by a deduction for IMS made in 2019 to 6.5 billion rubles, which is 0.16% of total personal income tax received by the consolidated budgets of the constituent entities of the Russian Federation. It also shows a slight tax effect of investment tax deduction in MIS from the standpoint of the size of budgets. However, for individual investors this tax effect can be significant in terms of enhancing the profitability of the invested funds compared to alternative investment directions.

Since 2015, the number of recipients of the investment tax deduction under PP. 2, paragraph 1, article 219 of the tax code (if you Deposit funds on IMS) has increased almost 20 times from 8.7 to 165,7 thousand taxpayers, the amount of deductions also 20 - fold from 2.5 to 49.9 billion. However, the proportion of deductions under IIS in the amount of investment deductions (to 3.21%) and deductions for personal income tax as a whole (up to 0.64%) remained insignificant. This confirms the relatively low demand for such deductions among taxpayers, the dependence on the limited material resources for long-term investments have a greater share of citizens. In this regard, the tax deduction for IMS, as part of the system of income taxation has a negative social impact because it carries an element is hidden, progressive rate, increasing monetary inequality after tax.

Improving tax incentives for investment activity of the population in parts of IMS assumes the continuation promote this tool and increase the degree of credibility, the formation of a legislative framework for the promotion of longer-term investment given the impact of income taxation on monetary inequality. In this study formed proposals for the development of IMS and investment tax deduction at IMS.