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Assessment of the Impact of Tax Incentives on Investment Activity in Special Economic Zones of the Russian Federation

Author

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  • Maria O. Kakaulina
  • Dmitry R. Gorlov

Abstract

The article examines tax incentives established in the special economic zones of the Russian Federation. The topic seems to be extremely relevant, since such an instrument of state support as tax incentives does not have a clear economic efficiency. In this regard, having high hopes for it in the current post-pandemic situation, the state risks depriving many enterprises of the opportunity to carry out their activities uninterrupted. This dictates the need for a comprehensive assessment of the effectiveness of the introduced tax incentives. The purpose of the article is to assess the impact of tax incentives on the investment activity of residents of special economic zones of the Russian Federation in the period 2016-2020. The hypothesis of the study is the absence of a significant impact of tax incentives, as well as the existence of a negative impact of such benefits on the investment activities of residents of special economic zones of the Russian Federation in some cases. The assessment is carried out by building power econometric models for all zones in the aggregate for each year of the five years under consideration. As a result, a significant positive relationship was found between the number of tax benefits for the previous time period and the volume of investments made within the zones in the current time period. Thus, a 2-fold increase in the intensity of the use of tax benefits by residents of the zones causes an increase in the size of current investments by 60-74%, depending on the period under consideration. The authors concluded that, contrary to popular belief about the inefficiency of tax incentives and their harmful impact to the budget system in the form of shortfalls in tax revenues, they are actually a unique and useful tool that promotes business development in specific areas. The practical significance of the study is expressed in the possibility of the Government of the Russian Federation applying the obtained results when making decisions on expanding the list of tax incentives operating in special economic zones or on extending their period of validity.

Suggested Citation

  • Maria O. Kakaulina & Dmitry R. Gorlov, 2022. "Assessment of the Impact of Tax Incentives on Investment Activity in Special Economic Zones of the Russian Federation," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 21(2), pages 282-324.
    • Handle: RePEc:aiy:jnjaer:v:21:y:2022:i:2:p:282-324
    DOI: http://dx.doi.org/10.15826/vestnik.2022.21.2.011
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    References listed on IDEAS

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    Cited by:

    1. Maria O. Kakaulina & Nikita A. Kazansky, 2023. "The impact of tax expenditures on economic growth: The US experience," Journal of New Economy, Ural State University of Economics, vol. 24(4), pages 41-63, January.
    2. Svetlana Demidova & Yuliya Tyurina & Anastasia Kulachinskaya & Olga Buzdalina & Igor V. Ilin & Victoriya Razletovskaia & Chulpan A. Misbakhova, 2024. "An Assessment of the Effectiveness and Scale of Tax Expenditures to Support Investments and Priority Sectors in G20 Countries," Economies, MDPI, vol. 12(6), pages 1-26, June.

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    More about this item

    Keywords

    investment activity; investments; tax incentives; fiscal stimulus; special economic zones; residents; investment attractiveness rating; cash-flow return on investment;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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