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Peer Pressure: The Puzzle of Tax Compliance in the Early Nineteenth-Century Russia

Author

Listed:
  • Elena Korchmina

    (New York University Abu Dhabi)

Abstract
How can developing countries successfully implement income taxes, which are generally desirable but costly to collect? This paper analyses the income tax compliance of elites in a developing country with a low administrative capacity, drawing attention to the role of either voluntary or quasi-voluntary components of tax acquiescence. In 1812, the Russian government introduced the progressive income tax, with the highest tax rate of 10 per cent. After Britain, the Russian Empire became the second country to adopt this levy – under the threat of Napoleonic invasion. Unlike the widely known and deeply investigated British case, the history of Russian income tax suffers from a lack of detailed research. I use a self-compiled unique dataset for estimating the level of tax compliance of the Russian noble elite at the individual level. The dataset is based on the self-reported tax returns of approximately 4,000 Russian aristocrats who had real estate in the Moscow region. Using narrative sources and crosschecking with official bank documents, I reveal not only that the Russian nobility declared reliable income information but also that the share of aristocratic evaders was relatively low (from 30 to 10 per cent). I argue that this surprisingly high level of tax compliance was achieved through a unique mechanism of tax collection involving the channels of social sanctioning and group identity, boosted by the national threat of Napoleonic invasion. This case could be considered as extremely important, insofar as the state could not achieve its fiscal aims due to coercive tools in the hands of bureaucracy but had to rely on subjects’ goodwill.

Suggested Citation

  • Elena Korchmina, 2018. "Peer Pressure: The Puzzle of Tax Compliance in the Early Nineteenth-Century Russia," Working Papers 0144, European Historical Economics Society (EHES).
    • Handle: RePEc:hes:wpaper:0144
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    File URL: https://www.ehes.org/wp/EHES_144.pdf
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    References listed on IDEAS

    as
    1. Sara Torregrosa Hetland & Oriol Sabaté, 2018. "Income tax and war inflation: was the ‘blood tax’ compensated by taxing the rich?," Working Papers 18010, Economic History Society.
    2. Leonor Freire Costa & Paulo Brito, 2018. "Why did people pay taxes? Fiscal innovation in Portugal and state making in times of political struggle (1500-1680)," Working Papers GHES - Office of Economic and Social History 2018/59, ISEG - Lisbon School of Economics and Management, GHES - Social and Economic History Research Unit, Universidade de Lisboa.
    3. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 818-860, June.
    4. Benno Torgler, 2002. "Does Culture Matter? Tax Morale in East-West-German Comparison," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 59(4), pages 504-528, December.
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    Cited by:

    1. Sussman, Nathan & Slivinski, Al, 2019. "Tax administration and compliance: evidence from medieval Paris," CEPR Discussion Papers 13512, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Russia; income tax; elite; nineteenth-century.;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • N93 - Economic History - - Regional and Urban History - - - Europe: Pre-1913
    • N33 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: Pre-1913

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