Methods of assessing of tax incentives effectiveness in special economic zones: an analytical overview

Abstract

Tax incentives and the tax policy as a whole are components of a system of solutions that are aimed at the economic climate improvement while establishing special economic zones (SEZ). The most common instruments of the tax policy are tax exemption, lower tax rates and tax concessions. One of the key issues of SEZs’ performance is the effectiveness of tax advantages applied in particular zone. The purpose of this study is to examine methods of assessing of tax incentives effectiveness in special economic zones. The study includes overview of existing approaches to tax incentives assessing in SEZs, which have been divided into the following groups: estimation of tax incentives effects on individual territorial development indicators, and comprehensive estimation of tax incentives effectiveness in a SEZ. The authors identified subjects of estimations, described each methodology and summarized the results. The authors focused their attention on and classified econometrical and statistical methods among the numerous approaches to assessing of tax incentives effectiveness in SEZs, which were built upon a variety of economic, and mathematical research techniques. The paper describes a method known as “difference in differences” that is widely implemented by scholars to estimate the effect of tax incentives in SEZs on individual territorial development indicators. This work also covers an effect of using tax incentives when conducting a comprehensive evaluation of tax advantages. It is also proposed a classification of quantitative indicators of tax incentives effectiveness in special economic zones. The study makes it possible to implement obtained results in assessing tax incentives effectiveness in the further development of Russian territories.