Working Paper: CEPR ID: DP4267
Authors: Maria Ponomareva; Ekaterina Zhuravskaya
Abstract: Three hypotheses about the nature of federal tax arrears in Russia in the second half of the 1990s are tested empirically. Tax arrears can be a result of: 1) liquidity problems in firms, 2) redistribute subsidies of the federal government, or 3) regional political resistance to federal tax collectors. Liquidity problems in firms explain a large part of variation in tax arrears. Regional political resistance to federal tax collectors was also an important factor: for a given level of liquidity, federal arrears accumulated faster in regions where governors had a larger popular base, regions with better bargaining position vis-à-vis the centre, and regions with governors in political opposition to the centre. We find that patterns of federal arrears are inconsistent with the redistributive politics premise that redistribution favours jurisdictions with ‘closer races’ for the incumbent in national elections. Variation in authorized tax deferrals, in part, can be explained by federal redistributive politics.
Keywords: redistributive politics; regional protection; russia; tax arrears; transition
JEL Codes: H11; H26; P26; R50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| liquidity problems in firms (G33) | federal tax arrears (H26) |
| regional political resistance (R50) | federal tax arrears (H26) |
| liquidity problems in firms (G33) | tax arrears (H26) |
| regional political resistance (R50) | tax arrears (H26) |