Federal Tax Arrears in Russia: Liquidity Problems, Federal Redistribution or Russian Resistance?

38 Pages Posted: 1 Apr 2004

See all articles by Maria Ponomareva

Maria Ponomareva

Northwestern University - Department of Economics

Ekaterina Zhuravskaya

Paris School of Economics (PSE)

Date Written: February 2004

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-a-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: Tax arrears, regional protection, Russia, transition, redistributive politics

JEL Classification: H11, H26, P26, R50

Suggested Citation

Ponomareva, Maria and Zhuravskaya, Ekaterina, Federal Tax Arrears in Russia: Liquidity Problems, Federal Redistribution or Russian Resistance? (February 2004). Available at SSRN: https://ssrn.com/abstract=515951

Maria Ponomareva

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States
847-492-0411 (Phone)

Ekaterina Zhuravskaya (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France