Subject Tax credit is an efficient tool to provide incentives for business entities to invest their profits in production facilities development and to introduce new technologies. Considering the investment deficit, the importance of performance evaluation of the existing system of tax incentives has been growing. Objectives The aim of the study is to examine the existing methodologies for tax incentives mechanism evaluation in certain regions of the Russian Federation in terms of its efficiency for investment activity, and to develop a uniform methodology to assess the tax incentives efficiency and budget losses. Methods We employed the methods of synthesis and comparative analysis to review the practice of evaluating the efficiency of tax incentives on the case of various regions of the Russian Federation. Results The comparative analysis of the existing techniques identified their shortcomings. Based on the revealed weaknesses, we defined the indicator characterizing the performance of tax credits provided for investment purposes, i.e. extra-budgetary investment in fixed capital in relation to the amount of tax credit and tax preferences. Conclusions Evaluating the tax incentives efficiency enables public authorities to identify the level of effectiveness of tax incentive forms and decide on their extension or replacement by other forms of support to investment activity. The proposed performance indicators of tax credits and tax preferences may be useful for public authorities to monitor the tax incentives application and optimization, to improve the quality of forecasting the results of financial support in the form of tax credits, and to reduce budget losses.
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