Indirect taxation as a state mechanism for smoothing the inequality of Russia’s residents consumption

Introduction: consumption inequality in Russia is consistently high. The decile ratio of funds is in the range of 7–9, while the Gini coefficient is 0.3–0.36. The potential of taxation in smoothing consumption inequality has not been implemented. Objectives: to assess the consumption inequality in Russia and the VAT tax burden differentiation impact by income groups of Russia’s residents to prove the possibilities of smoothing consumption inequality through indirect taxation. Methods: consumption differentiation and concentration indicators analysis, i.e. dynamics of the funds decile coefficient and the Gini coefficient, as well as calculation of the average effective VAT rate for decile groups and assessment of the VAT changes impact on it for individual items of consumer expenditure. The calculations were carried out using the Data Analysis package in MS Excel for 2004–2022 based on Rosstat data. These were compared with the data from Eurostat for EU countries. The generated data set contains about 600 indicators of consumption inequality and the indirect taxation impact. Results: indirect taxation in Russia in the context of decile groups of citizens is regressive and does not contribute to smoothing inequality. The difference in the consumption structure of the least and most affluent citizens by cost items opens prospects for smooth inequality through indirect taxation. Conclusions: it is advisable to reduce VAT to 10 % on housing and communal services, accounting for a significant part of the expenses of the poor, by analogy with necessities, as well as increase the return of VAT by 20 % on recreation, hotels and public catering, for which the spending of the rich is significantly higher than by the poor. This will ensure the progressive nature of indirect taxation: the average effective VAT rate for the first decile will decrease to 11.52 %, or 0.78 percentage points, for the tenth decile it will increase to 13.86 %, or 1.3 percentage points, and the decile coefficient of funds will decrease from 7.94 to 7.75.