Essays on tax policies and international trade.

Abstract

After a decade of high growth, all segments of the Russian economy are experiencing a slowdown caused by the global financial crisis. To boost growth and living standards, and to ensure that Russia emerges from this global crisis, the need for a correct and comprehensive economic policy response is of high importance these days. This dissertation addresses two important economic issues in Russia: tax evasion and tariff reform. Though these topics have been studied intensively over the last century, there have been only a few attempts made in the economics field that give a direct estimate of tax evasion and tariff elimination for the Russian economy. The primary reason for preventing a direct estimate is a lack of reliable and representative data. This dissertation uses the most recent industry data from Russia not previous used and provides a theoretical and quantitative analysis of tax compliance and tariff reform in Russia. The first chapter of this dissertation starts with an assessment of the role of taxation as a macroeconomic tool. It then reviews the problematic issues facing the tax system of developing countries such as tax evasion and tariff liberalization. The second chapter explores tax compliance behavior of companies in Russia. I develop a static industry model of tax evasion with heterogeneous producers to investigate the key determinants that give rise to tax evasion in Russia. Assuming that the probability of detection depends on the level of production, the model explains why small firms evade taxes. My quantitative experiments allow me to estimate how much the model economy gains if the tax burden, penalties, and probability of detection were changed. The third chapter discusses potential effects of trade liberalization on the Russian economy. I construct a static applied general equilibrium model and perform a series of numerical experiments, such as a partial and complete tariff elimination scenario. I construct a social accounting matrix for 2003 for Russia. I find that tariff elimination reform has a positive effect in terms of trade diversification, but a negative effect in terms of consumer and social welfare.