Improving the Assessment of Regional Tax Capacity by Selected Types of Taxes

Sub-federal authorities have the power to administer transportation tax, gambling tax, local taxes and taxes on total income, including setting rates, providing benefits or determining the tax base, which makes these taxes an important instrument of sub-national revenue policy. Together with the state duty, they make up about 10% of sub-federal tax revenues and are generally referred to as other types of taxes when assessing tax capacity in calculating fiscal equalization grants to regions. Given the increasing role of other types of taxes, the task of correct assessment of tax potential for them is becoming more and more urgent. The article examines the relationship between a region’s share in actual revenues from other types of taxes, a region’s share in the total labor force and a region’s shares in actual revenues from individual taxes using a sample of 85 regions for 2019–2023. The panel regression model employs individual fixed effects, which allows us to account for the impact of region-specific factors, including the level of regional tax competition, such as reduced tax rates and additional tax benefits. The assessment results show that the tax capacity for other types of taxes is proportional to the region’s share in the total labor force and the region’s share in the tax potential for personal income tax. These results allow us to refine the formula for assessing tax capacity for other types of taxes. Since the Russian tax system is currently undergoing significant changes, including those related to profit tax and tax levied in connection with the application of the simplified tax system, the obtained estimates can be subsequently refined using new data.