<!-- Start of picture text --> Size of Fiscal Revenue from Taxes<br>50<br>43.3<br>45<br>37.5 38.0<br>40 35.6<br>33.2 36.7<br>35 30.3 33.0 4.1<br>27.4 28.0 2.5<br>30 24.3 2.8<br>2.7 12.0 11.2<br>25 23.0<br>20 17.9 19.7 3.6 21.3 0.9 21.4 3.4 4.3<br>5.6 0.3 7.2 6.0<br>15 7.1 1.8 6.0 10.3 25.1 6.0<br>10<br>3.8 2.4 17.1<br>5 7.0 12.6 11.4 13.3 6.9 9.0<br>0 -0.4<br>2014 2016 2014 2013 2017 2015 2016 2015<br>-5<br>RUS KYG ARM GEO MDA TJK UKR BLR<br>Indirect Taxes PIT SIC Other direct Taxes Total Revenue Total Taxes<br>% of GDP<br><!-- End of picture text -->

# **Figure 7** : Share of Major Revenue Sources in the GDP

_Source:_ Authors’ calculations using CEQ Master Workbooks (MWBs).

_Note_ : Figures in black bold are governments’ total revenues from taxes comprising PIT, SIC, other direct taxes and indirect taxes. Countries are sorted in the ascending order of the total revenues from taxes. Total revenues in red are general government revenues which also includes social contributions (which Armenia and Georgia don’t have in referenced years) as well as oil revenues (which are sizeable in Russia) and other revenues (sizeable in Belarus). In Armenia, since social contribution had been implemented in 2014 and fully introduced in 2018, they are not reflected in the figure and in the analysis.

Not only overall tax revenues but also tax structures vary significantly across the eight countries, reflecting different stages of development of the fiscal system and administrative capacities. Fiscal revenue relies heavily on personal taxes in all countries apart from Russia, where the gap between total revenue and revenue from personal taxes is attributable to sizable corporate taxes and oil revenue (Popova, Matytsin et al. 2018). Indirect taxes are dominant source of revenue in Armenia, Kyrgyzstan, Georgia and especially in Tajikistan where they constitute over 75% of total tax revenues. In Moldova and Ukraine, a major part of tax revenues comes from personal direct taxes.

As demonstrated by Figure 8, direct taxes are progressive and indirect taxes are regressive in all countries with the exception of Armenia, where indirect taxes are neutral and direct taxes appear to be regressive. Georgia, Kyrgyzstan, Moldova, Tajikistan and Ukraine have relatively more progressive direct taxes and contributions, in comparison to the rest of the countries. However, Kyrgyzstan is the only country in the sample where the tax system as a whole can be considered progressive. In all other FSU countries, the tax systems are regressive.

Personal income tax (PIT) is typically the most progressive component of direct taxation. There are, however, important structural differences across the FSU countries, namely, flat rates are applied in all countries except for Armenia and Moldova<sup>3</sup> . The rates vary from 10% in Kyrgyzstan, to 13% in Russia, Belarus and Tajikistan, 18% in Ukraine and 20% in Georgia. Literature suggests that in general, flat PIT is not the best structure to enhance the redistributive impact but combined with exemption for low-income earners, PIT is progressive in all countries which adopt flat rates (Keen, Kim et al. 2008). Low progressivity of direct taxes in Armenia, Russia and Belarus is low due to lack of exemptions for low-income earners.

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