IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Impact of tax regime on real sector investment in Russia: marginal effective tax rates for physical, human and R&D capital

  • Karzanova Irina


Registered author(s):

    In this paper we present theoretical framework for quantitative assessment of tax burdens on investments in physical, human and R&D capital in Russia. The modified and extended version of King–Fullerton model for computation of marginal effective tax rates on marginal hypothetical investments was used. Calculations performed show non-neutrality of tax treatment of investment across types of assets and types of financing. Debt financing receives preferential tax treatment, while the less favorable is financing through retained earnings. The most preferential treatment receives household investment in higher education. Combined tax and budget system as of now provide significant subsidies to "free of charge" education in state institutions and fairly small subsidies to "paid" higher education in commercial sector. "Subsidizing" effect shrinks rapidly with continuing commercialization of higher education. Calculated estimates of tax burdens on investment in physical capital are more or less compatible with those in the OECD countries. The less favorable tax treatment in Russia is on investment in R&D. Tax burdens are especially high for short-lived successful investment and almost prohibitively high for partially unsuccessful R&D investment projects. Such tax treatment of R&D investment contrasts sharply with practices of many OECD countries, which provide tax incentives to risky investment and where governments share risks with private investors. Simulations performed showed that certain adjustments in the Russian Tax Code could reduce the tax load on investment in risky R&D projects. Analysis of sensitivity of computed tax burden to estimated parameters is done.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Our checks indicate that this address may not be valid because: 500 Can't connect to If this is indeed the case, please notify (Anton Pashchenko)

    Download Restriction: no

    Paper provided by EERC Research Network, Russia and CIS in its series EERC Working Paper Series with number 05-16e.

    in new window

    Date of creation: 24 Nov 2005
    Date of revision:
    Handle: RePEc:eer:wpalle:05-16e
    Contact details of provider: Postal: EERC Research Network, Russia and CIS, 1, Mazepy Str., suite 202, Kyiv, 01010 Ukraine
    Phone: +38(044)492-8012
    Fax: +1(202)478-1968
    Web page:

    Order Information: Postal: EERC Research Network, Russia and CIS, 1, Mazepy Str., suite 202, Kyiv, 01010 Ukraine
    Web: Email:

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eer:wpalle:05-16e. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anton Pashchenko)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.