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Strategic Tax Collection and Fiscal Decentralization: The Case of Russia

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German Economic Review

Published online on

Abstract

In a centralized federation, in which tax rates and taxation rules are set by the federal government, manipulating the thoroughness of tax auditing and the effectiveness of tax collection could be attractive for regional authorities. In this article, we test for strategic tax collection empirically using data of the Russian Federation. Russia's regional authorities in the 1990s have always been suspected of tax auditing manipulations in their favour. However, in the 2000s, increasing bargaining power of the centre seems to induce tax collection bodies in the regions to manipulate tax auditing in favour of the federal centre. Our findings confirm the existence of strategic tax collection for the Yeltsin period; the results for the Putin period are however ambiguous.