The impact of regional tax incentives on industrial performance

AutorMiliausha R. Pinskaya - Julia A. Steshenko - Nadiya M. Sabitova - Elena N. Lizunova - Chulpan M. Shavaleyeva
CargoFederal State Budgetary Institution «Financial Research Institute» - Federal State Budgetary Institution «Financial Research Institute» - Kazan Federal University - Kazan Federal University - Kazan Federal University
Páginas710-728
Periódico do Núcleo de Estudos e Pesquisas sobre Gênero e Direito
Centro de Ciências Jurídicas - Universidade Federal da Paraíba
V. 9 - Nº 04 - Ano 2020
ISSN | 2179-7137 | http://periodicos.ufpb.br/ojs2/index.php/ged/index
710
THE IMPACT OF REGIONAL TAX INCENTIVES ON
INDUSTRIAL PERFORMANCE
Miliausha R. Pinskaya
1
Julia A. Steshenko
2
Nadiya M. Sabitova
3
Elena N. Lizunova
4
Chulpan M. Shavaleyeva
5
Abstract: The article explores the interplay
between regional tax incentives and the
trends in industrial performance indicators.
The authors advance arguments for their
statement that it is necessary to increase
industrial performance in order to create
growth poles and centres in regional
development. They range the industrial
performance indicators based on their
assessment. The authors provide a rationale
for the choice of areas for tax incentives at the
regional level that should take into account
indicators of efficiency of investments in
fixed assets at industrial enterprises,
innovation activities in industry, and growth
of industrial production and import
substitution. At the regional level, this can be
achieved through the use of horizontal tax
incentives, including investment tax
1
Federal State Budgetary Institution «Financial Research Institute»
2
Federal State Budgetary Institution «Financial Research Institute»
3
Kazan Federal University
4
Kazan Federal University
5
Kazan Federal University
deductions, support for R&D and special
investment contracts.
Keywords: region, growth poles and centres,
industry, horizontal and vertical incentives,
indicator, performance, tax incentives, tax
burden, R&D
1. Introduction
Tax regulation in the real sector of
economy is aimed at stimulating economic
growth, which is an integral indicator for
assessing the effectiveness of economic
development. To achieve the desired effect at
the regional level, it is necessary to assess the
impact of tax incentives on the industrial
performance. Our research hypothesis is that
the provision of tax incentives should
Periódico do Núcleo de Estudos e Pesquisas sobre Gênero e Direito
Centro de Ciências Jurídicas - Universidade Federal da Paraíba
V. 9 - Nº 04 - Ano 2020
ISSN | 2179-7137 | http://periodicos.ufpb.br/ojs2/index.php/ged/index
711
improve certain indicators of industry
development and contribute to creating
growth poles and centres in regional
development. Therefore, in our opinion, it is
necessary to explore the trends in industrial
performance indicators. As the majority of
tax incentives are characterised by territorial
limitations, the efforts to increase
effectiveness of industrial development
should be correlated with the provision of
regional tax incentives.
2. Literature review
Numerous empirical studies of the
relationship between the tax level and the
economic growth have not provided
definitive evidence on the existence of such
relationship or its character. Some studies
reveal negative effects of the increased tax
burden on the economic growth, while others
deny that there is any relationship between
them.
S. Gupta and his co-authors, based
on their study with the use of econometric
6
Gupta, S., Clements, B., Baldacci, E., &
Mulas-Granados, C. (2005). Fiscal policy,
expenditure composition, and growth in low-
income countries. Journal of International
Money and Finance, 24(3), 441463.
7
McDermott, C.J., & Wescott, R.F. (1996).
An empirical analysis of fiscal adjustments.
IMF Staff Papers, 43 (December), 725753.
8
Alesina, A., & Perotti, R. (1995). Fiscal
expansion and fiscal adjustments in OECD
countries. Economic Policy, 21, 205-248.
models, come to the conclusion that fiscal
consolidation in low-income countries has a
negative impact on economic growth both in
the short and long term
6
. The works by
Christopher J. McDermott and Robert F.
Wescott
7
, Alberto Alesina and Roberto
Perotti
8
, and Jürgen von Hagen and Rolf
Strauch
9
demonstrate that that under certain
circumstances fiscal contractions can
stimulate economic growth. The opposite
view is held by Folster and Henrekson
10
, who
show that 10% increase in the tax burden
(relative to the gross domestic product)
reduces economic growth by 1%. N. Ahmad
and his co-authors
11
studied the impact of
taxes on the economic growth in Pakistan.
Based on the analysis of data for the period
from 1976 to 2011, they conclude that taxes
have a significant negative impact on the
gross domestic product, which is used as an
indicator of economic growth: 1% increase in
tax burden leads to 0.08% decline in gross
domestic product.
9
Von Hagen, J., & Strauch, R. (2001). Fiscal
consolidations: quality, economic conditions,
and success. Public Choice, 109, 327346.
10
Folster, S., & Henrekson, M. (2001).
Growth effects of government expenditure
and taxation in rich countries. European
Economic Review, 45(8), 15011520.
11
Ahmad, N., Ahmad, A., & Yasmeen, K.
(2013). The impact of tax on economic
growth of Pakistan: An ARDL approach.
Journal of Basic and Applied Scientific
Research, 3(11), 392398.

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