Acta Univ. Agric. Silvic. Mendelianae Brun. 2020, 68, 995-1009

https://doi.org/10.11118/actaun202068060995
Published online 2020-12-17

Risks of Regional Tax Systems and Their Portfolio Decomposition: The Case of Modern Russia

Marina Malkina, Rodion Balakin

Center of Macro and Microeconomics, Institute of Economics and Entrepreneurship, Lobachevsky State University of Nizhni Novgorod, 23 Prospekt Gagarina, 603950 Nizhni Novgorod, Russia

Received March 15, 2020
Accepted October 29, 2020

The purpose of this paper is an assessment of the risk of regional tax systems at different levels of the budget system (consolidated, federal, regional and local), decomposition of this risk by sources (various taxes and tax groups) and the isolation of internal (related to own tax return volatility) and external (related to the correlation of tax returns volatility) risk components. Using the portfolio approach, we measured and decomposed the risk of tax systems of 80 constituent entities of the Russian Federation in 2006–2017. As a result, we found a weak positive relationship between the risk and return of the regional tax systems at all budget levels. By comparing the structure of return and risk of regional tax systems, we identified taxes – risk dampers and taxes – risk enhancers, and estimated the overall level of imbalance in regional tax systems at the studied budget levels. It allowed us to conclude about the effectiveness of diversification of regional tax systems, the advisability of combining different taxes in a single portfolio, or transferring them to another level of the budget system.

Funding

The reported study was funded by RFBR according to the research project No. 19-010-00716, “Development of methodology and non-traditional methods for assessing financial instability”.

References

24 live references