Decomposition of Tax Revenue Growth in Russian Regions

Abstract

The subject of the study is tax revenues of the consolidated budgets of Russian federal subjects and their determinants. The objective is a quantitative assessment of the contribution of various sectors to the growth of tax revenues in the consolidated budgets of federal subjects and their factor decomposition. A four-factor additive–multiplicative model for the formation of tax revenues in the region is developed. Factors of tax revenues at the regional level in this model are the share of the sector in the regional economy (structural factor), its tax burden (fiscal factor), the level of internal absorption of tax revenues (interbudgetary factor), and the size of GRP (scale factor). To assess the contribution of these factors in regions and in the country at the aggregated and disaggregated levels, mixed factor analysis was used, including proportional, logarithmic, and integral methods. The study revealed that the largest contribution to the growth of tax revenues in the consolidated budgets of federal subjects came from the five largest regions, as well as a number of types of economic activity: manufacturing, combined financial and real estate operations, trade, and the mining sector. A change in the level of internal tax absorption on average contributed to a decrease in tax revenues to the budgets of federal subjects, while an increase in GRP, a change in the sectoral structure, and a change in tax profitability led to an increase in tax revenues to territorial budgets. The difference in the influence of these factors at the aggregated (country) and disaggregated (mid-regional) levels is explained by the degree of their interregional differences. The results of the study are applicable to assess potential tax revenues in regions, taking into account the possibilities of managing their determinants.