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Strategic tax collection and fiscal decentralization: the case of Russia

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Author Info
Alexander Libman () (University of Mannheim)
Lars P. Feld () (University of Heidelberg)

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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 equalization. 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 favor. However, in the 2000s increasing bargaining po¬wer of the centre seems to induce tax collection bodies in the regions to manipulate tax auditing in favor of the federal centre. Our findings confirm the existence of strategic tax collection for the Yeltsin period after exclusion of outliers; the results for the Putin period are however rather ambiguous.

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Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2009/11.

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Length: 66 pages
Date of creation: 2009
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Handle: RePEc:ieb:wpaper:2009/7/doc2009-11

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Related research
Keywords: fiscal federalism; tax arrears; transition economies;

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Find related papers by JEL classification:
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ronald Wintrobe, 2001. "Tax Evasion and Trust," UWO Department of Economics Working Papers 200111, University of Western Ontario, Department of Economics. [Downloadable!]
  2. 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, September. [Downloadable!] (restricted)
  3. 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, September. [Downloadable!] (restricted)
  4. Anna Ivanova & Michael Keen & Alexander Klemm, 2005. "The Russian 'flat tax' reform," Economic Policy, CEPR, CES, MSH, vol. 20(43), pages 397-444, 07. [Downloadable!] (restricted)
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  5. 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. [Downloadable!] (restricted)
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  6. Federico Varese, 1997. "The Transition to the Market and Corruption in Post-socialist Russia," Political Studies, Political Studies Association, vol. 45(3), pages 579-596. [Downloadable!] (restricted)
  7. Irina Slinko & Ekaterina Zhuravskaya & Evgeny Yakovlev, 2005. "Laws for Sale: Evidence from Russia," American Law and Economics Review, Oxford University Press, vol. 7(1), pages 284-318. [Downloadable!] (restricted)
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  8. Yakovlev, Andrei, 1999. "Black cash tax evasion in Russia: Its forms, incentives and consequences at firm level," BOFIT Discussion Papers 3/1999, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
  9. Sven Stö & Christian Traxler, 2005. "Tax Evasion and Auditing in a Federal Economy," International Tax and Public Finance, Springer, vol. 12(4), pages 515-531, August. [Downloadable!] (restricted)
  10. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422, August.
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  12. Sonin, Konstantin, 2003. "Provincial Protectionism," CEPR Discussion Papers 3973, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  13. Cremer, Helmuth & Gahvari, Firouz, 2000. "Tax evasion, fiscal competition and economic integration," European Economic Review, Elsevier, vol. 44(9), pages 1633-1657, October. [Downloadable!] (restricted)
  14. Cai, Hongbin & Treisman, Daniel, 2004. "State corroding federalism," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 819-843, March. [Downloadable!] (restricted)
  15. Christian Baretti & Bernd Huber & Karl Lichtblau, 2002. "A Tax on Tax Revenue: The Incentive Effects of Equalizing Transfers: Evidence from Germany," International Tax and Public Finance, Springer, vol. 9(6), pages 631-649, November. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Libman, Alexander, 2008. "Economic role of public administration in Central Asia: Decentralization and hybrid political regime," MPRA Paper 10940, University Library of Munich, Germany. [Downloadable!]
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