Academic journal article Asian Social Science

Tax Relieves: Costs of Their Application in Taxation and Issues of the Efficiency Evaluation

Academic journal article Asian Social Science

Tax Relieves: Costs of Their Application in Taxation and Issues of the Efficiency Evaluation

Article excerpt


The main objective of this work was to develop a set of scientific and practical recommendations aimed at improving the efficiency of preferential tax treatment based on the analysis of the costs of tax relieves, their types, and their performance evaluation. Direct and indirect costs of tax relieves granted by the World Bank were analyzed within the research. Based on the analysis of legal acts that were in effect in 1990-2000, the specific features and forms of tax relieves used in the Russian Federation were identified. The article shows the necessity of expanded understanding of the tax relieves based on their actual manifestations in various forms, and, based on this, extension of the efficiency evaluation object in the circumstances of the Russian Federation. The article formulates the conclusion about the need to transform the tax relieves in order to strengthen their stimulating effect on the economy development and achievement of the economic benefit and enhancement of the social return. The regulatory-legislative, methodological, and organizational problems of evaluating the efficiency of tax advantages at the regional level (using the materials of the Republic of Dagestan) were revealed, and also a set of recommendations to address them was provided."

Keywords: tax relief, costs of tax relieves, advantages, efficiency (fiscal, budgetary, economic, and social), the Russian Federation, the Republic of Dagestan

1. Introduction

Tax relieves are one of the main and mobile tools of fiscal regulation of social and economic development. The potential of their use in regulation of economic and social sphere is many-sided. Tax relieves are considerable economic benefits granted by the state and local government to certain economic entities and individuals for the purpose of investment attraction in priority industries or regions, and also for the purpose of social support of certain citizens. Tax relieves can both have the economic and social effect and cause considerable costs. At that, the effect of granting them is not always adequate to budget losses. Certain states benefit from the growth of investments as a result of tax relieves granting, while others fail to attract expected investments, and also suffer budget losses. The main reason of such state of affairs is that costs exceed the expected benefits (effects). This predetermines the urgency of their study. The performance indicators of evaluation of the tax relieves efficiency, the costs of their application and the directions of their reduction were studied in the works by such foreign scientists, as: D. Bondolino (2007), A. Klemm (2009), V. P. Vishnevsky (2006), A. Easson, E. Zolt (2002), Yu. B. Ivanov (2009), S. James (2009), J. P. Morriset, & N. Pirnia (1999), H. Zee (2002).

Among the Russian scientists engaged in such issues, we can mark the studies of D. B. Volkov (2011), I. V. Gorsky (2014), A. P. Kiriyenko (2014), I. A. Mayburov (2012), V. G. Panskiy (2012), E. N. Orlova (2013), T. A. Malinin (2010), M. R. Pinskaya (2014), N. A. Solovyev (2012). Despite the intensive research performed by the Russian scientists, we have to admit that the main contribution to the study of the problem of costs related to granting tax relieves and of their performance was made by foreign economists.

2. Methodology

The article suggests revised methodology of evaluation of the tax relieves' efficiency adequate to the conditions of relieves granting in the Russian Federation. The issues of functioning of tax relieves are closely connected with the problem of enhancement of the methodology of their efficiency evaluation. In that case, when the relief has no social return or it is economically inefficient, such relief cannot fully perform its role as the most mobile tool of fiscal regulation. Besides, inefficient tax relieves result not only in direct shortfall in budget revenues, but also to such phenomena as decrease in competitiveness of goods (works, services) and in market motivation of economic entities, which do not use tax relieves; to slowdown of the rates of economic growth, to strengthening of social inequality and tensions in the society, etc. …

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