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Strategic Tax Collection and Fiscal Decentralisation: The Case of Russia

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  • Alexander Libman
  • Lars P. Feld

Abstract

In a centralized federation, where tax rates and taxation rules are set by the federal govern-ment, 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 Federa-tion. Russia?s regional authorities in the 1990s have always been suspect of tax auditing ma-nipulations 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 Center for Research in Economics, Management and the Arts (CREMA) in its series CREMA Working Paper Series with number 2007-09.

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Date of creation: May 2007
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Handle: RePEc:cra:wpaper:2007-09

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Keywords: fiscal federalism; tax arrears; transition economies;

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  1. Maria Ponomareva & Ekaterina Zhuravskaya, 2004. "Federal tax arrears in Russia "Liquidity problems, federal redistribution or regional resistance?"," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(3), pages 373-398, 09.
  2. Rudiger Ahrend, 2005. "Speed of Reform, Initial Conditions or Political Orientation? Explaining Russian Regions' Economic Performance," Post-Communist Economies, Taylor & Francis Journals, vol. 17(3), pages 289-317.
  3. 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.
  4. Cai, Hongbin & Treisman, Daniel, 2004. "State corroding federalism," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 819-843, March.
  5. 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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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. Bas, Maria & Ledezma, Ivan, 2007. "Market Access and the Evolution of within Plant Productivity in Chile," Economics Papers from University Paris Dauphine 123456789/6913, Paris Dauphine University.
  2. Libman, Alexander, 2009. "Russian federalism and post-Soviet integration: Divergence of development paths," MPRA Paper 12944, University Library of Munich, Germany.
  3. Libman, Alexander, 2010. "Constitutions, regulations, and taxes: Contradictions of different aspects of decentralization," Frankfurt School - Working Paper Series 138, Frankfurt School of Finance and Management.
  4. 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.
  5. 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.
  6. Libman, Alexander, 2008. "Endogenous (De)Centralization and the Russian Federalism," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 9(1), pages 23-57.
  7. Alexander Libman, 2012. "Sub-national political regimes and asymmetric fiscal decentralization," Constitutional Political Economy, Springer, vol. 23(4), pages 302-336, December.

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