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Federal Tax Arrears in Russia: Liquidity Problems, Federal Redistribution, or Regional Resistance?

Author

Listed:
  • Maria Ponomareva

    (Northwestern University)

  • Ekaterina Zhuravskaya

    (Institute for Advanced Study, Princeton, Center for Economic and Financial Research, Moscow, and CEPR)

Abstract

Three hypotheses about the nature of federal tax arrears in Russia in the second half of the 1990s are tested empirically. Tax arrears can be a result of: 1) liquidity problems in firms, 2) redistribute subsidies of the federal government, or 3) regional political resistance to federal tax collectors. Liquidity problems in firms explain a large part of variation in tax arrears. Regional political resistance to federal tax collectors was also an important factor: For a given level of liquidity, federal arrears accumulated faster in regions where governors had larger popular base, regions with better bargaining position vis-a-vis the center, and regions with governors in political opposition to the center. We find that patterns of federal arrears are inconsistent with redistributive politics premise that redistribution favors jurisdictions with “closer races” for the incumbent on the national elections. Variation in authorized tax deferrals, in part, can be explained by federal redistributive politics.

Suggested Citation

  • Maria Ponomareva & Ekaterina Zhuravskaya, 2004. "Federal Tax Arrears in Russia: Liquidity Problems, Federal Redistribution, or Regional Resistance?," Working Papers w0003, New Economic School (NES).
    • Handle: RePEc:abo:neswpt:w0003
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    Cited by:

    1. Lambert-Mogiliansky, Ariane & Sonin, Konstantin & Zhuravskaya, Ekaterina, 2007. "Are Russian commercial courts biased? Evidence from a bankruptcy law transplant," Journal of Comparative Economics, Elsevier, vol. 35(2), pages 254-277, June.
    2. Micklewright, John & Klugman, Jeni & Redmond, Gerry, 2002. "Poverty in the Transition: Social Expenditures and the Working-Age Poor," CEPR Discussion Papers 3389, C.E.P.R. Discussion Papers.
    3. Jorge Martinez-Vazquez & Santiago Lago-Peñas & Agnese Sacchi, 2017. "The Impact Of Fiscal Decentralization: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(4), pages 1095-1129, September.
    4. Libman Alexander & Feld Lars P., 2013. "Strategic Tax Collection and Fiscal Decentralization: The Case of Russia," German Economic Review, De Gruyter, vol. 14(4), pages 449-482, December.
    5. Koen Schoors & Konstantin Sonin, 2005. "Passive Creditors," International Finance, Wiley Blackwell, vol. 8(1), pages 57-86, March.
    6. Dilip Mookherjee & Pranab Bardhan, 2005. "Decentralization, Corruption And Government Accountability: An Overview," Boston University - Department of Economics - Working Papers Series WP2005-023, Boston University - Department of Economics, revised Jun 2005.
    7. Ariane Lambert-Mogiliansky & Konstantin Sonin & Ekaterina Zhuravskaya, 2006. "Are Russian commercial courts biased?Evidence from a natural bankruptcy experiment," Working Papers halshs-00590402, HAL.
    8. Alexander Libman, 2015. "Words or deeds: what matters? On the role of symbolic action in political decentralization," Empirical Economics, Springer, vol. 49(3), pages 801-838, November.
    9. Vasyl Kvartiuk & Thomas Herzfeld, 2021. "Redistributive Politics in Russia: The Political Economy of Agricultural Subsidies," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 63(1), pages 1-30, March.
    10. Vera Ivanova, 2018. "Spatial convergence of real wages in Russian cities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(1), pages 1-30, July.
    11. Libman, Alexander, 2008. "Federalism and regionalism in transition countries: A survey," MPRA Paper 29196, University Library of Munich, Germany.
    12. 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.
    13. Zakolyukina Anastasia, 2006. "Bankrtuptcy in Russia: External Management Performance," EERC Working Paper Series 06-09e, EERC Research Network, Russia and CIS.
    14. Elena Jarocińska, 2010. "Intergovernmental grants in Russia," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 18(2), pages 405-427, April.
    15. Alejandro Esteller-Moré, 2011. "Is the tax administration just a money machine? Empirical evidence on redistributive politics," Economics of Governance, Springer, vol. 12(3), pages 275-299, September.
    16. Kvartiuk, V. & Herzfeld, T. & Ghukasyan, S., 2018. "The Political Economy of Russian Agricultural Subsidies," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277040, International Association of Agricultural Economists.
    17. Hochman, Gal & Tabakis, Chrysostomos & Zilberman, David, 2013. "The impact of international trade on institutions and infrastructure," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 126-140.
    18. Mokhtari, Manouchehr & Grafova, Irina, 2007. "Corruption: Theory and evidence from the Russian Federation," Economic Systems, Elsevier, vol. 31(4), pages 412-422, December.
    19. Sonin, Konstantin, 2010. "Provincial protectionism," Journal of Comparative Economics, Elsevier, vol. 38(2), pages 111-122, June.
    20. Alexander Libman & Lars P. Feld, 2013. "Strategic Tax Collection and Fiscal Decentralization: The Case of Russia," German Economic Review, Verein für Socialpolitik, vol. 14(4), pages 449-482, November.

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    More about this item

    Keywords

    Tax arrears; Regional protection; Russia; Transition; Redistributive politics;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights

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