Business and Economic Horizons

  Previous Article | Back to Volume | Next Article
  Abstract | References | Citation | Download | Preview | Statistics
Volume 14
Issue 3
Online publication date 2018-06-14
Title Economic impact of the change in tax rate on small enterprises of manufacturing and construction sectors: Evidence from Russia 2006-2014
Author Karen Tumanyants
Abstract
The hypothesis about positive influence of lower tax rate was tested on the Russian small businesses of construction and manufacturing sectors. The period from 2006 to 2014 includes the three-year gap, during which the net income tax rate was the same for all Russian regions, and the six-year interval of regionally differentiated tax rates. Quantitative estimates of the consequences of tax change without time lag, with time lags 1 and 2 year were made on the basis of double logarithmic regressions with fixed effects. Positive effect of lower tax rate was documented. The number of enterprises was the indicator, which was influenced most. A regional tax rate decrease by 1 per cent results in an increase of the number of small enterprises by 0.1-0.2%. This effect becomes evident in the first year of regional tax rate change and remains on the same level during the following two years. 1% decrease in tax rate led to 0.1% increase in the turnover of the company. Tax stimulus led to an increase of employment in manufacturing industry (the coefficient of elasticity is 0.1), while the impact on employment in construction sector was not identified. There is a potential for expanding tax revenues to the Russian budget system by increasing the taxation base with the help of the positive effect from tax rate reduction.
Citation
References
Acemoglu, D., & Robinson, J. (2010). The role of institutions in growth and development. Review of Economics and Institutions, 1(2), 1-33.

Andreev, V. I., Isaeva, T. A., & Krylov, S. N. (2016). Vlijanie nalogovogo bremeni na sbor nalogov v bjudzhet gosudarstva [Impact of tax burden on the collection of taxes into state budget]. Science Review: Theory And Practice(6), 52-62 [in Russian].

Barro, R. J. (2015). Convergence and modernisation. The Economic Journal, 125(585), 911-942.

Bassini, A., & Scarpetta, S. (2001). The driving forces of economic growth: panel data evidence for the OECD countries. OECD Economic Studies, 33(2), 9-56.

Bergh, A., & Henrekson, M. (2011). Government size and growth: a survey and interpretations of the evidence (Working paper No. 858). Retrieved December 10, 2017, from http://www.ifn.se/

Bondonio, D., & Greenbaum, R. (2007). Do tax incentives affect local economic growth? What mean impacts miss in the analysis of enterprise zone policies. Regional Science and Urban Economics, 37(1), 121-136.

Brons-Petersen, O. (2017). 30 years of tax reforms: how much impact on Danish growth? In D. D. Thomakos, & K. I. Nikolopoulos, Taxation in crisis: tax policy and the quest for economic growth (pp. 121-144). Cham: Springer International Publishing.

Dackehag, M., & Hansson, E. (2012). Taxation of income and economic growth: an empirical analysis of 25 rich OECD countries (Working paper No. 2012:6). Retrieved December 17, 2017, from http://project.nek.lu.se/

de Mooij, R. A., & Ederveen, S. (2008). Corporate tax elasticities. A reader’s guide to empirical findings. Oxford Review of Economic Policy, 24(4), 680-697.

Devereux, M. (2007). Developments in the taxation of corporate profit in the OECD since 1965: rates, bases, and revenues (Working paper No. 07/04). Retrieved December 15, 2017, from https://www.sbs.ox.ac.uk/

Fajnzylber, P., Maloney, W. F., & Montes-Rojas, G. V. (2011). Does formality improve micro-firm performance? Evidence from the Brazilian SIMPLES program. Journal of Development Economics, 94(2), 262-276.

Gemmel, N., Kneller, R., & Sanz, I. (2013). The growth effects of tax rates in the OECD (Working paper No. 2/13). Retrieved December 30, 2017, from https://www.victoria.ac.nz/

Gravelle, J. G., & Marples, D. J. (2014). Tax rates and economic growth. Retrieved December 3, 2017, from http://digitalcommons.ilr.cornell.edu/key_workplace/1211

Gravelle, J., & Hungerford, T. (2007). Corporate tax reform: issues for congress (RL34229). Retrieved December 12, 2017, from https://fas.org/sgp/crs/misc/RL34229.pdf

IMF. (2016). Acting now, acting together. Fiscal monitor. International Monetary Fund.

Li, W., & Sarte, P.-D. (2004). Progressive taxation and long-run growth. American Economic Review, 94(5), 1705-1716.
Lucas, R. E. (1990). Supply-side economics: an analytical review. Oxford Economic Papers, 42(2), 293-316.

Mankiw, N. G., Romer, R., & Weil, D. (1992). A contribution to the empirics of economic growth. Quarterly Journal of Economics, 107(2), 407-437.

Redonda, A., & Galletta, S. (2017). Corporate flat tax reforms and businesses’ investment decisions: evidence from Switzerland. International Tax and Public Finance, 24(6), 962-996.

Riedl, A., & Rocha-Akis, S. (2012). How elastic are national corporate income tax bases in OECD countries? The role of domestic and foreign tax rates. Canadian Journal of Economics, 45(2), 632-671.

Romer, P. M. (1990). Human capital and growth: theory and evidence. Carnegie Rochester Conference Series on Public Policy, 32(1), 251-286.

Sinenko, O. A. (2016). Methods of assessing of tax incentives effectiveness in special economic zones: an analytical overview. Journal of Tax Reform, 2(3), 168-178.

Slemrod, J., & Kawano, L. (2016). How do corporate tax bases change when corporate tax rates change? With implications for the tax rate elasticity of corporate tax revenues. International Tax and Public Finance, 23(3), 401-433.

Solow, R. M. (1956). A contribution to the theory of economic growth. Quarterly Journal of Economics, 70(1), 65-94.

Tatarkin, A. I., Maksimov, A. D., & Maksimov, T. A. (2015). Optimizacija metodicheskogo soprovozhdenija primenenija nalogovyh l'got v regionah: praktika Permskogo kraja [Optimization of methodological support of application tax benefits in regions: practice of Perm region]. Economy of Region, 1(1), 197-213 [in Russian].

Thomakos, D. D., & Vasilopoulou, Y. (2017). Tax evasion, tax administration,and the impact of growth: tax enforcement as regulatory failure in a high tax rates, high tax evasion, and low-growth economic environment. In D. D. Thomakos, & K. I. Nikolopoulos, Taxation in crisis: tax policy and the quest for economic growth (pp. 175-203). Cham: Springer International Publishing.

Tsenes, C., & Thomakos, D. D. (2017). The double trap: taxes and subsidies as determinants of economic growth and the end of the downward growth spiral in Greece. In D. D. Thomakos, & K. I. Nikolopoulos, Taxation in crisis: tax policy and the quest for economic growth (pp. 359-387). Cham: Springer International Publishing.

Tumanyants, K. (2015). Fiskal'nyj jeffekt snizhenija nalogovoj nagruzki na maloe predprinimatel'stvo v Rossii [Fiscal effect of reduced taxes for small businesses in Russia]. Financial journal, 2(24), 16-24 [in Russian].

Tumanyants, K., & Sinitsyna, E. D. (2017). Jeffekt snizhenija nalogovoj stavki: sluchaj malogo biznesa v Rossii [The effect of lowering tax rates: the case of small business in Russia]. XVIII April International Academic Conference on Economic and Social Development. 11-14 April 2017. Moscow [in Russian].

Tumanyants, K., & Soboleva, E. D. (2014). Jeffekt snizhenija nalogovoj stavki na ob#ekt "dohody minus rashody" pri uproshhennoj sisteme nalogooblozhenija [Effect of tax rate decrease for the object "income minus expenses" at the simplified taxation system]. Regional economy. South of Russia(3), 74-81 [in Russian]

Keywords Small business, entrepreneurship, tax rate, construction, manufacturing, fiscal stimulus, fixed effects model, the simplified system of taxation, the object of "net income", employment, revenue, turnover
DOI http://dx.doi.org/10.15208/beh.2018.45
Pages 642-658
Download Full PDF Download
  Previous Article | Back to Volume | Next Article
Share
Search in articles
Statistics
Journal Published articles
BEH 558
Journal Hits
BEH 1135565
Journal Downloads
BEH 41315
Total users online -