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Strategic Tax Collection and Fiscal Decentralisation: The Case of Russia

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  • Lars P. Feld
  • Alexander Libman

Abstract

In a centralized federation, where tax rates and taxation rules are set by the federal government, manipulating the thoroughness of tax auditing and the effectiveness of tax collection could be attractive for regional authorities because of a variety of reasons. These range from tax competition to principal-agent problems, state capture and benefits of fiscal equalisation. In this paper we discuss strategic tax auditing and collection from the perspective of fiscal federalism and test for strategic tax collection empirically using data of the Russian Federation. Russia’s regional authorities in the 1990s have always been suspect of tax auditing manipulations in their favour. However, in the 2000s increasing bargaining power of the centre seems to induce tax collection bodies in the regions to manipulate tax auditing in favour of the federation. We find partial evidence in favour of both of these hypotheses.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2031.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_2031

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Keywords: fiscal federalism; tax arrears; transition economies;

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References

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  1. Rudiger Ahrend, 2005. "Speed of Reform, Initial Conditions or Political Orientation? Explaining Russian Regions' Economic Performance," Post-Communist Economies, Taylor and Francis Journals, vol. 17(3), pages 289-317.
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  13. Ronald Wintrobe, 2001. "Tax Evasion and Trust," UWO Department of Economics Working Papers 200111, University of Western Ontario, Department of Economics.
  14. Vladimir Mau & Konstantin Yanovskiy, 2002. "Political and Legal Factors of Economic Growth in Russian Regions," Post-Communist Economies, Taylor and Francis Journals, vol. 14(3), pages 321-339.
  15. Polterovich, Victor, 2007. "Institutional Trap," MPRA Paper 20595, University Library of Munich, Germany.
  16. Roger Congleton & Andreas Kyriacou & Jordi Bacaria, 2003. "A Theory of Menu Federalism: Decentralization by Political Agreement," Constitutional Political Economy, Springer, vol. 14(3), pages 167-190, September.
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  18. Ponomareva, Maria & Zhuravskaya, Ekaterina, 2004. "Federal Tax Arrears in Russia: Liquidity Problems, Federal Redistribution or Russian Resistance?," CEPR Discussion Papers 4267, C.E.P.R. Discussion Papers.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Strategic tax auditing
    by Economic Logician in Economic Logic on 2009-08-26 14:47:00
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Cited by:
  1. Libman, A., 2010. "Empirical Research on Determinants of Decentralization: A Literature Survey," Journal of the New Economic Association, New Economic Association, issue 6, pages 10-29.
  2. Bönke, Timm & Jochimsen, Beate & Schröder, Carsten, 2011. "Fiscal equalization and regions' (un)willingness-to-tax: Evidence from Germany," Economics Working Papers 2011,06, Christian-Albrechts-University of Kiel, Department of Economics.
  3. Libman, Alexander, 2009. "Constitutions, Regulations, and Taxes: Contradictions of Different Aspects of Decentralization," MPRA Paper 15854, University Library of Munich, Germany.
  4. Libman, Alexander, 2009. "Models of market integration in Central Asia – comparative performance," MPRA Paper 17510, University Library of Munich, Germany.
  5. Libman, Alexander Mikhailovich, 2009. "Эндогенные Границы И Распределение Власти В Федерациях И Международных Сообществах
    [ENDOGENOUS BOUNDARIES AND DISTRIBUTION O    ," MPRA Paper 16473, University Library of Munich, Germany.
  6. Libman, Alexander, 2009. "Russian federalism and post-Soviet integration: Divergence of development paths," MPRA Paper 12944, University Library of Munich, Germany.
  7. Libman, Alexander, 2008. "Endogenous (De)Centralization and the Russian Federalism," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 9(1), pages 23-57.
  8. Libman, Alexander, 2008. "Federalism and regionalism in transition countries: A survey," MPRA Paper 29196, University Library of Munich, Germany.
  9. Libman, Alexander, 2008. "Informal regionalism in Central Asia: subnational and international levels," MPRA Paper 26417, University Library of Munich, Germany.
  10. Libman, Alexander, 2008. "Economic role of public administration in Central Asia: Decentralization and hybrid political regime," MPRA Paper 10940, University Library of Munich, Germany.

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