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Identification of Signs of “Business Fragmentation” in Russian Far Eastern Territories with Special Economic Status

Author

Listed:
  • Olga A. Sinenko

    (Far Eastern Federal University (FEFU), Vladivostok 690922, Russian Federation)

  • Timofey P. Mitrofanov

    (Far Eastern Federal University (FEFU), Vladivostok 690922, Russian Federation)

Abstract

The issue of “business fragmentation” has been relevant in Russia for over ten years. Business striving to ensure competitiveness makes it necessary to look for mechanisms to reduce the tax burden, applying special tax regimes or preferential tax conditions for residents of territories with special economic status. In this paper, the authors analyze the theoretical prerequisites for substantiating the signs of “business fragmentation,” and study the scope of application of “business fragmentation” schemes within the framework of preferential tax conditions for territories with special economic status in the Far East. The basic research methods were content analysis, comparative analysis and synthesis. As a result of the content analysis of judicial practice, the criteria for business fragmentation, confirming the formal division of a business, were substantiated. The authors carried out a comparative analysis of resident companies and identified, based on open data, 159 residents of priority social and economic development areas (PSEDAs) and 625 residents of the Free Port of Vladivostok (FPV) with signs of “business fragmentation.” Those amounted to 28.49 % and 29.48 % in the total number of active residents, respectively. Vladivostok is the leader in terms of the number of residents with signs of “business fragmentation,” with 443 residents of the FPV. The most common signs of “business fragmentation” among resident companies in territories with a special economic status of the Far East are substantiated: common persons managing companies, common or identical type of activity, and common address of location. Common types of activity among resident companies with signs of “business fragmentation” within territories with special economic status of the Far East are warehousing and auxiliary transport (15 % of PSEDA; 12.3 % of the FPV); construction of buildings (16.5 % of the FPV); and operations with real estate (14 % of the FPV).

Suggested Citation

  • Olga A. Sinenko & Timofey P. Mitrofanov, 2021. "Identification of Signs of “Business Fragmentation” in Russian Far Eastern Territories with Special Economic Status," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 3, pages 88-103, June.
    • Handle: RePEc:fru:finjrn:210307:p:88-103
    DOI: 10.31107/2075-1990-2021-3-88-103
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    References listed on IDEAS

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    1. Thomas Sigler & Kirsten Martinus & Iacopo Iacopini & Ben Derudder, 2020. "The role of tax havens and offshore financial centres in shaping corporate geographies: an industry sector perspective," Regional Studies, Taylor & Francis Journals, vol. 54(5), pages 621-633, May.
    2. Kemme, David M. & Parikh, Bhavik & Steigner, Tanja, 2020. "Tax Morale and International Tax Evasion," Journal of World Business, Elsevier, vol. 55(3).
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    More about this item

    Keywords

    business fragmentation; Free Port of Vladivostok; priority socio-economic development areas; Far East; tax risks; tax incentives;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls

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