Impact of Intraregional Tax Decentralization on a Region’s Tax Base

Abstract

The article examines the impact of intraregional tax decentralization in Russia on the growth of the tax bases in regard to simplified taxation system, personal income tax, corporate property tax and corporate income tax. The main hypothesis is that tax decentralization to local budgets has a positive effect on the growth of the revenue base of the corresponding tax, and the more local authorities can influence taxpayers, the stronger this effect. The paper also tests the hypothesis that tax decentralization to the local level can have different effects in poor versus rich regions. Hypotheses are tested using the pooled panel data model, the between-estimator model, the fixed effects model (or the withinestimator model), and the hybrid model. Marginal effects are estimated in order to take into account the level of regional wealth. Based on the results of the calculations, it is concluded that there is a positive effect from decentralizing the simplified taxation system, personal income tax, corporate income tax and corporate property tax, but only in certain groups of regions. In particular, with respect to simplified taxation system and corporate property tax, this turned out to be true for the less well-off regions, and with respect to personal income tax—for the poorest. At the same time, the dynamics of decentralization rates (decentralization of additional percentage points of the rate) do not have a significant positive effect on the tax base. The article was written on the basis of the RANEPA state assignment research program.