Vertical Tax Externalities in the Theory of Fiscal Federalism

Michael Keen

doi:10.2307/3867412

Vertical Tax Externalities in the Theory of Fiscal Federalism

International Monetary Fund Staff Papers ◽

10.2307/3867412 ◽

1998 ◽

Vol 45 (3) ◽

pp. 454 ◽

Cited By ~ 123

Author(s):

Michael Keen

Keyword(s):

Fiscal Federalism

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Tax competition and the activity of the regional tax policy

Voprosy Ekonomiki ◽

10.32609/0042-8736-2020-10-5-27 ◽

2020 ◽

pp. 5-27

Author(s):

S. M. Drobyshevsky ◽

N. S. Kostrykina ◽

A. V. Korytin

Keyword(s):

Tax Competition ◽

Tax Policy ◽

Fiscal Federalism ◽

Policy Instruments ◽

Tax Incentives ◽

Fiscal Autonomy ◽

Tax Legislation ◽

Tax Exemptions ◽

Open Question ◽

Regional Budgets

The problem of efficiency of regional tax expenditures is an actual issue of the fiscal policy and fiscal federalism in Russia. A large fiscal autonomy allows federal subjects to realize a more active tax policy to attract new investments. One cannot claim current fiscal powers of the Russian regions to be wide. However, not all the regions use even existing tax policy instruments. Moreover, out of the regions that use them only few provide incentives to stimulate investment decisions. Others use regional tax measures to support businesses that already have strong positions in the region. And it is an open question whether such tax incentives are efficient. On the other hand, an aggressive tax competition for investors can also be wasteful for regional budgets. In this paper, we calculate indicators that characterize the depth and scope of tax exemptions provided at the regional level. The calculations are based on the open tax statistics. Through the analysis of the tax legislation as well as the economic structure of selected regions, we reveal the inducements of their higher activity: federal regional tax policy, tax competition or benefits for budget-forming companies of the region.

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