Why Did the Consolidated Tax Regime Cause Massive Losses in Tax Revenue in Russia?

Natalya S. Kostrykina, Andrey V. Korytin


In Russia, the consolidated tax regime was introduced in 2012 but in 2019 the decision was made to abolish it from 2023. The initial reform purported to discourage companies from using transfer pricing for domestic transactions between companies of one group and to ensure a more just allocation of the corporate income tax across Russian regions. In practice, however, the government’s shortfall in tax revenue reached two billion US dollars in certain years or 0.15% of Russia’s GDP. Our analysis has shown that the publicly available data are, unfortunately, insufficient for assessing the success of this reform, in particular, whether the two above-mentioned goals were achieved. However, we can focus on the role the following two factors played in the budgetary losses. The first such factor is that profits and losses of group members can be consolidated within one accounting (fiscal) period. The second factor is that consolidated taxpayer groups shift their tax bases to regions with lower tax rates (in some cases, regions established tax preferences explicitly for the purpose of attracting members of these groups). These loopholes reveal the deficiencies of the Russian consolidation model: for example, the ‘everybody or nobody’ principle is not applied in Russia and consolidated taxpayer groups are allowed to form the perimeter of tax consolidation themselves. In this paper, statistical tax reporting data are used to estimate the total amount of the shortfall in tax revenue caused by the regional tax preferences granted to members of consolidated taxpayer groups. In some cases, as our analysis of regional tax legislation shows, these tax preferences were intended to ‘steal’ the tax base from other regions or at least to prevent the regions’ own tax bases from being ‘stolen’ by rivals. Judging by the total figures, regional tax competition had a negative influence on budgetary revenues. This, however, was not the main factor as the shortfall in revenue was mostly caused by the possibility of immediate offset of losses within consolidated taxpayer groups.

For citation

Kostrykina N.S., Korytin A.V. Why Did the Consolidated Tax Regime Cause Massive Losses in Tax Revenue in Russia? Journal of Tax Reform. 2020;6(1):6–21. DOI: 10.15826/jtr.2020.6.1.072.

Article info

Received January 31, 2020; Revised March 1, 2020; Accepted April 10, 2020


tax consolidation, budget federalism, interregional tax competition, regional tax preferences, revenue equalization


Khan Niazi S.U. Re-Launch of the Proposal for a Common Consolidated Corporate Tax Base (CCCTB) in the EU: A Shift in Paradigm. Legal Issues of Economic Integration. 2017;44(3):293–314.
2. Mintz J. Europe slowly lurches to a common consolidated corporate tax base: Issues at stake. In: A Common Consolidated Corporate Tax Base for Europe = Eine einheitliche Körperschaftsteuerbemessungsgrundlage für Europa. Berlin, Heidelberg: Springer; 2008, pp. 128–138. DOI: 10.1007/978-3-540-79484-4_7.
3. Hentze T. The challenge of moving to a Common Consolidated Corporate Tax Base in the EU, IW-Report, No. 2/2019. Köln: Institut der deutschen Wirtschaft (IW); 2019. Available at: http://hdl.handle.net/10419/191535.
4. Mau V. et al. Russian economy in the 1st half of 1997: Tendencies and perspectives. Moscow: IEPP; 1997. Vol. 17. (In Russ.).
5. Sinelnikov S., Alekseev M. (eds) Problems of the tax system of Russia: theory, experience, reform. Moscow: IEPP; 2000. Vol. 1. (In Russ.). Available at: https://www.iep.ru/files/text/working_papers/19.pdf.
6. Kireeva A.V. Perspectives of implementation of taxpayers’ consolidation institute in the Russian Federation. Economico-politicheskaya situatsia v Rossii. 2008;(2):56–58. (In Russ.). Available at: https://www.iep.ru/files/text/trends/02-08.pdf.
7. Kizimov A.S., Shegurova T.A. Consolidated taxpayer regime: history of development and principles of functioning. Finansy i kredit = Finance and Credit. 2009;15(30):11–16. (In Russ.).
8. Kondrashova N.A. Background consolidated group of taxpayers. Mezhdunarodnyi bukhgalterskii uchet = International Accounting. 2013;16(2):28–34. (In Russ.).
9. Babenko D.A. Introduction of the Concept of the Consolidated Group of Taxpayers in Russia: Preliminary Results. Finansovyi zhurnal = Financial Journal. 2014;(2):135–142. (In Russ.). Available at: https://www.finjournal-nifi.ru/images/FILES/Journal/Archive/2014/2/fm_2014_2.pdf.
10. Troyanskaya M.A., Ermakova E.A. Consolidated group of taxpayers: combination of state and taxpayers. Ekonomicheskoe vozrozhdenie Rossii = Economic Revival of Russia. 2015;(1):56–64. (In Russ.). Available at: http://e-v-r.ru/wp-content/uploads/2015/04/2015-1-43.pdf.
11. Babenko D.A. About development of foreign practice of application of the consolidated taxation concept. Transportnoye delo v Rossii = Transport business in Russia. 2014;(1):235–237. (In Russ.).
12. Migukina N.E. Foreign experience of state regulation of institute of the consolidated taxation within providing economic security. Voprosy ekonomiki i prava = Economic and Law Issues. 2015;(90):81–87. (In Russ.). Available at: http://law-journal.ru/files/pdf/201512/201512_81.pdf.
13. Malis N.I., Grundel L.P. The analysis of the consolidated taxpayer institution in Russia. Finansy i kredit = Finance and Credit. 2015;(3):38–46. (In Russ.). Available at:
14. Korolyova L.P. The role of consolidated groups of taxpayers in providing innovative breakthrough: to be or not to be. Journal of Tax Reform. 2015;1(2-3):177–193. DOI: 10.15826/jtr.2015.1.2.011.
15. Gorbatenko E.O. Consequences of Establishing Consolidated Group of Taxpayers to Regional Budget Revenues in Example of Irkutsk Area. ECO. 2015;45(4):177–183. (In Russ.). DOI: 10.30680/ECO0131-7652-2015-4-177-183.
16. Konovalova T.V. The results of functioning of consolidated taxpayer groups in 2012–2015 on the example of Republic of Mari El. Innovatsionnoe razvitie ekonomiki = Innovative Development of Economy. 2016;(2):113–115. (In Russ.). Available at: http://www.ineconomic.ru/sites//field_print_version/no2322016.pdf.
17. Ilyin V.A., Povarova A.I. Consolidated Taxation and Its Consequences for Regional Budgets. Ekonomika regiona = Economy of Region. 2019;15(1):70–83 (In Russ.). DOI: 10.17059/2019-1-6.
18. Bannova K.A., Dolgikh I.N., Kuzmina N.A. Improving the methodology for distribution of regional tax revenues from consolidated taxpayers group based on added value. Finansy i kredit = Finance and Credit. 2016;22(3):29–39. (In Russ.). Available at:
19. Zolotareva A.B. Several ways for development of a legislation about consolidated taxpayer groups. Rossiiskoe ekonomicheskoe razvitie = Russian Economic Development. 2017;24(1):74–81. (In Russ.).
20. Leontieva J.G., Zaugarova E.V., Improvement of Russian consolidated groups of taxpayers taxation system. Zhurnal pravovykh i ekonomicheskikh issledovanii = Journal of Legal and Economic Studies. 2014;(2):109–115. (In Russ.). Available at: http://giefjournal.ru/sites/default/files/023_4.pdf.
21. Nikitin K.M., Avdienkova M.A., Zakharova O.O., Gilmanova E.A. Consolidated Groups of Taxpayers: How We Should Use the Moratorium. Finansovyi zhurnal = Financial Journal. 2016;(5):37–51. (In Russ.). Available at: https://www.finjournal-nifi.ru/images/FILES/Journal/Archive/2016/5/fm_2016_5.pdf.
22. Shatalov S.S. About the main directions of tax policy at present stage. Finansy = Finance. 2015;(5):3–7. (In Russ.)

Copyright (c) 2020 Natalya S. Kostrykina, Andrey V. Korytin

eLibrary logoeLibrary logo  DOAJ logo ERIH PLUS logo 

© Journal of Tax Reform : ISSN 2414-9497 (online), ISSN 2412-8872 (print)