Influence of the industrial structure of economy on the risk level of Russian regions' tax systems

Abstract

The paper is aimed at study of the influence of industrial structure of regional economy on its tax system risk level. The tax systems risk level of Russian regions in 2006 - 2014 was assessed applying the H. Markowitz portfolio approach under the assumption that regional "portfolio" consists of main economic activities. It allowed us to evaluate contribution of various economic activities to total tax system risk, to decompose it into internal and external by origin and to identify the critical zones of instability in Russian regions. The coefficients of variation of tax yield rate revealed different relative impact of the economic activities on instability of regional tax systems. Besides, we found mainly positive albeit changing in strength correlation between internal and total tax system risk level and tax yield rate in economic activities. The diversification level of regional economies was evaluated by means of standard deviation of regional industrial structure from country structure considered as a benchmark. Inclusion of this level along with the tax yield rate and a set of control variables into two developed regressions estimated with GRP-weighted least-square method allowed us to confirm positive influence of diversification on the tax systems stability. Our results may be applicable to management of tax system risks at the regional level.