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Tax Offsets or Netting Operations in Post-Soviet Public Finance

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  • JOHN E. ANDERSON

Abstract

Post-Soviet economies are plagued by a public sector practice whereby the Ministry of Finance cancels tax liabilities that enterprises owe it in exchange for debts the Ministry owes enterprises. Although the practice seems innocuous enough to its practitioners, it has multiple distorting effects. Netting operations distort prices, prevent increased monetization of the economy, and hinder the pace of economic transformation in post-Soviet economies. This paper describes the practice of netting operations, draws an analogy with input-output models used in planned economies, and reveals the multiple distorting effects of netting operations.

Suggested Citation

  • John E. Anderson, 2003. "Tax Offsets or Netting Operations in Post-Soviet Public Finance," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 39(3), pages 27-41, May.
  • Handle: RePEc:mes:emfitr:v:39:y:2003:i:3:p:27-41
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    References listed on IDEAS

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    1. Kornai, J, 1979. "Resource-Constrained versus Demand-Constrained Systems," Econometrica, Econometric Society, vol. 47(4), pages 801-819, July.
    2. Joel Hellman & Mark Schankerman, 2000. "Intervention, Corruption and Capture: The Nexus between Enterprises and the State," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(3), pages 545-576, November.
    3. Eric Maskin & Chenggang Xu, 2001. "Soft budget constraint theories: From centralization to the market," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 9(1), pages 1-27, March.
    4. Richard E. Ericson, 1991. "The Classical Soviet-Type Economy: Nature of the System and Implications for Reform," Journal of Economic Perspectives, American Economic Association, vol. 5(4), pages 11-27, Fall.
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    Cited by:

    1. John E. Anderson, 2005. "Fiscal Reform and its Firm-Level Effects in Eastern Europe and Central Asia," William Davidson Institute Working Papers Series wp800, William Davidson Institute at the University of Michigan.

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