A Model of Tax Evasion with Heterogeneous Firms
The paper develops a static industry model of tax evasion with heterogeneous producers. My model is used to investigate the key determinants that give rise to tax evasion in Russia. Assuming that the probability of detection depends on the level of production, the model predicts that the largest non-payers in Russia are not the large firms that constitute the fuel and energy complex but primarily small-sized firms. I use the statistical reports of 49,829 Russian firms provided by ZAO “Russian investment corporation” to calibrate and estimate the model. My quantitative experiments allow me to estimate how much the economy under study gains as the tax burden and entry fixed costs change. The results show that a decrease in the tax rate decreases the number of tax evading firms and reduce the size of tax evasion. Holding the tax rate constant, a decrease in the entry costs increases the firms’ participation rate but increases the number of evading firms.
Applied General Equilibrium Model of Taxation and International Trade in Russia
In recent years, the International Monetary Fund (IMF), the World Bank and the members of the World Trade Organization (WTO) have criticized Russia for its high border taxes. Despite the first political attempt made in 2000-2001 to reduce import tariffs, the average tariff in Russia in 2003 was still in the range of 13 to 14.5 per cent, a level considerably higher than the OECD countries. Since Russia is a country heavily dependent on trade taxes, I focus on the fiscal impact of eliminating the tariff revenues as well as analyzing its potential effect on domestic production, price level, trade flows, and social welfare. I also analyze the effects of Russia’s decision to impose high export taxes as an attempt to compensate for revenue loss. To conduct the analysis, I construct a static applied general equilibrium (GE) model and perform a series of numerical experiments, such as a partial and complete tariff elimination scenario. To calibrate the model, I work with an input-output (IO) table of the most recent year available, 2003, and construct a social accounting matrix (SAM) with a much higher degree of disaggregation and precision than any such matrix in the existing literature on Russia’s economy. I find that tariff elimination reform has a positive effect in terms of trade diversification, but a negative effect in terms of consumer and social welfare. To compensate for the money loss in the budget, the government tends to impose higher export taxes on foreigners.
An Analysis and Comparison of Norwegian and Russian SWFs during the Crisis of 2008-2009
with Mehmet Caner (NCSU) and Thomas Grennes (NCSU)
This paper analyzes the functions and performance of the Stabilization Funds of the Russian Federation and Norway, the countries highly dependent on export of raw materials. This article sheds light on some of the important issues in times of economic crisis. In what aspects are Russian and Norwegian stabilization funds similar? What makes them differ? Is Russia being more like Mexico and Venezuela currently spending most of its oil funds rather than saving for the future? Based on the quarterly returns figures, the Russian Stabilization Fund seems to have very high average monthly returns. Moreover, in 2008 Russia put massive injections in the fund in the last six months and then suddenly stopped investment. Norway, on the other hand, injected much more than before, but not as massive and constituted up to 2-6% of the fund’s level.
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