International Accounting

Assessing the risk and performance of tax systems based on industry-specific, regional and mixed portfolios

Vol. 21, Iss. 4, APRIL 2018

Received: 7 November 2017

Received in revised form: 21 November 2017

Accepted: 5 December 2017

Available online: 14 April 2018

Subject Heading: Tax and taxation

JEL Classification: С13, Н21

Pages: 479–498

Malkina M.Yu. National Research Lobachevsky State University of Nizhny Novgorod, Nizhny Novgorod, Russian Federation

ORCID id: not available

Balakin R.V. National Research Lobachevsky State University of Nizhny Novgorod, Nizhny Novgorod, Russian Federation rodion

ORCID id: not available

Subject The article investigates risk and efficiency of tax systems at regional, industrial and country levels.
Objectives The study aims to develop a portfolio approach to assessing the risk and performance of tax systems of Russian regions, main economic activities and the Russian Federation as a whole, to determine relationship between risk and return, and to evaluate the contribution of various regions and economic activities to the national tax system's risk and return.
Methods The study applies the portfolio approach by H. Markowitz to assess the risk of tax systems. The Sharpe ratio serves to assess the efficiency of the systems' components. Using the decomposition method, we assess the contribution of certain industries and regions to total risk of the national tax system.
Results We assessed the risk of tax systems in eighty Russian regions for 2006–2015 and the contribution of certain sectors thereto. We found strong negative relationship between risk and efficiency of regional tax system. Our analysis demonstrates that three large regions and the mining sector make the largest contribution to the national tax system's risk. We also identify regions and sectors acting as catalysts and buffers of tax revenue volatility.
Conclusions The findings enable to establish relationship between risks and performance of tax portfolio components and assess the contribution of certain sectors and regions to total risk of the national tax system. They may be helpful to implement the tax policy and manage structural changes in the economy both at regional and federal levels.

Keywords: tax system, risk, performance, portfolio approach


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