Tax Incentives for Economic Growth in the Russian Far East: Broad vs. Targeted Stimuli

The purpose of this study is to justify the choice of tax incentive policy instruments aimed at the economic development of the Russian Far East, which is facing acute demographic and environmental problems. To model the dynamics of the region’s real economic system, this study employed a mathematical model based on actual data from 2010 to 2021, covering economic, technological, and socio-ecological aspects. Using the versatile AnyLogic 8.0 platform for agent-based and system dynamics modeling, experiments on alternative tax incentive policy options involving both broad tax incentives and targeted economic development measures were conducted. Specifically, a 50% investment tax deduction for residents in special economic zones in the Russian Far East was implemented. The experimental results show that, despite comparable population dynamics, targeted stimulation of growth poles through public-private partnership programs outperforms broad tax incentives for economic entities in the Russian Far East. This is evident in higher economic growth rates in the region, particularly during the experimental period, except for 2040–2050, where adverse demographic trends constrain growth in both scenarios. The theoretical significance of the application of this method has shown that it allows us to obtain new significant results in the subject area of research due to the consideration of the complex interaction of factors of influence both at the micro- and macro-level, primarily behavioral factors that are fundamentally important for understanding the action of taxes. The practical implications of this study lie in defining the parameters of tax policy to target and stimulate growth poles in regions serving as hubs for generating and disseminating new technologies. The planned perspective is to encourage population growth and ensure sustained economic development in Russia’s Far East. It is advisable to explore comprehensive tax and budgetary regulations that simultaneously address economic, socio-demographic, and environmental issues in the region. Doi: 10.28991/ESJ-2024-08-03-021 Full Text: PDF