Tax incentives for supporting competitiveness of telecommunication manufacturers

Abstract

The article is dedicated to the analysis of cost factors, primarily tax burden, that can explain the observable price differences on the Russian market between domestic telecommunication equipment and imports from China and USA. The relevance of the research is justified by the critical significance of this market for the economic, information, and technological security of the Russian Federation in a changing geopolitical environment. The present methods of tax burden calculation analyzed in this article revealed the sub-industry level measurement is the least studied. Based on data on 42 companies for 2015-2017, the cost structure of the telecommunication equipment manufacturing industry was studied, a model for computing the tax burden rate on domestic enterprises using imported components was built. The model was adjusted for a crosscountry comparison to reflect the specifics of countries’ tax systems. The calculations were based on the assumption of equal production costs in the three countries under examination. A comparative analysis showed that the tax burden in Russia is on average higher than in USA (almost 3 percentage points) and in China for enterprises operating in preferential economic zones (about 2 percentage points). However, this difference in tax burden rate does not explain the observed price discrepancy on the domestic market (up to 21 percent). The cost of components and cost of debt are additionally examined as factors that elucidate the divergence between economic conditions. An approximate assessment of their influence showed that the effect of reducing average costs with an increase in output of components, which is especially characteristic of China, has the largest impact. For American exporters, the tax burden level and high-end offers are the main competitive advantages. A number of tariff regulation measures that allow one to compensate for the price discrepancy on the domestic market are proposed for innovation policy in order to stimulate the technological development of national producers.