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

26 Pages Posted: 27 Aug 2004

See all articles by Maria Ponomareva

Maria Ponomareva

Northwestern University - Department of Economics

Ekaterina Zhuravskaya

Paris School of Economics (PSE)

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) redistributive subsidies of the federal government, or 3) regional political resistance to federal tax collectors. Liquidity problems in firms explain a large part of the 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, in regions with a better bargaining position vis-a-vis the centre, and in 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 the national elections. Variation in authorized tax deferrals can be explained in part by federal redistributive politics.

Suggested Citation

Ponomareva, Maria and Zhuravskaya, Ekaterina, Federal Tax Arrears in Russia Liquidity Problems, Federal Redistribution or Regional Resistance?. Economics of Transition, Vol. 12, No. 3, pp. 373-398, September 2004. Available at SSRN: https://ssrn.com/abstract=584072

Maria Ponomareva (Contact Author)

Northwestern University - Department of Economics ( email )

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

Ekaterina Zhuravskaya

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

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