RuEn

Journal section "Public finances"

Assessing the Efficiency of Tax Incentives in the System for Managing Regional Finances

Igonina L.L., Mamonova I.V., Suleimanov M.M.

6 (48), 2016

Igonina L.L., Mamonova I.V., Suleimanov M.M. Assessing the Efficiency of Tax Incentives in the System for Managing Regional Finances. Economic and Social Changes: Facts, Trends, Forecast, 2016, no. 6 (48), pp. 180-192. DOI: 10.15838/esc.2016.6.48.10

DOI: 10.15838/esc.2016.6.48.10

Abstract   |   Authors   |   References
The paper analyzes existing techniques for assessing the effectiveness of tax incentives in the system for managing regional finances and reveals their advantages and disadvantages. It points out major conditions that determine the effectiveness of tax incentives at the regional level. The authors prove that assessing the effectiveness of tax incentives should focus, first, on identifying the relationship between the amounts of falling-out incomes and real economic benefits to the state and taxpayers that they entail; second, on determining the degree of correlation for this relationship; third, on adopting the decisions proceeding from the analysis of decisions concerning the extension of the incentive and its adjustment or possible abolition. The paper substantiates the conclusion that the effectiveness of tax incentives should be evaluated on the basis of three criteria: fiscal, economic and social. At that, the effectiveness of tax incentives at the regional level should be analyzed in several stages: calculation of budgetary, economic and social efficiency ratios; definition of the integral coefficient reflecting the total assessment of tax incentives efficiency; adoption of the decision about the appropriateness of introducing or further using the incentive, the decision being based on the calculations carried out previously. On the basis of the research the authors put forward a methodology for assessing the effectiveness of tax incentives based on the systematization of the totality of indicators in the context of structural determinants and calculation of the integral coefficient, which in contrast to existing techniques helps give an integrated assessment of the effectiveness of tax incentives at the subnational level, the assessment being structured by key blocks; the authors’ methodology also helps identify budgetary, economic and social implications of providing tax incentives. Moreover, the proposed methodology helps evaluate the effectiveness of incentives at the regional level in dynamics taking into consideration the most significant criteria that influence the composition and structure of the budget, economic performance of taxpayers, and significant socio-economic indicators of the region. The presence of the total integral index allows the legislative and executive authorities to implement well-grounded decisions about the existing benefits aimed to develop the investment and innovation vector at the sub-national level

Keywords

tax administration, criteria, integral index, regional finance, tax incentives, efficiency assessment, falling-out incomes, deflator index, algorithm budget revenues

View full article