Effectiveness Assessment of Tax Benefits in Terms of Reduced Rates of Insurance Contributions for IT-companies in Russia

Sergey M. Drobyshevsky, Andrew V. Korytin and Natalya S. Kostrykina

Journal of Tax Reform, 2023, vol. 9, issue 3, 376-397

Abstract: The relevance of the research topic is determined by new changes to the taxation treatment of IT companies, applied by the Russia Federation in 2021, which are called the IT maneuver. Previously, in 2010, IT organizations benefited in terms of reduced rates of insurance contributions to the pension, medical and social insurance funds. To make informed decisions on further stimulation of the IT industry, it is important to determine the effectiveness of tax benefits already provided. The purpose of this paper is to quantify the economic effect of IT benefits on the economic performance of IT companies. The hypothesis of the study means that IT companies using this support get an incentive for development and demonstrate better economic performance compared to other businesses in the industry. The business that has received additional financial resources due to savings on insurance contributions can use them to increase employee remuneration, expand its business (resulting in growth in the number of employees and revenues) or, at least, achieve greater profitability. The methodology of the study is as follows. The enterprises applying the insurance benefit were identified according to the sample of enterprises in the IT sector. Further, a comparison was made in respect of economic indicators of the benefit recipients and indicators of companies from the same industry having no benefits. Main findings of the quantitative analysis show a significant outperformance of economic growth for companies applying the IT benefit compared to those companies having no benefit. Practical relevance of the obtained findings means that the benefit on insurance contributions for software developers is a significant factor in the development of Russian IT-industry as a whole. The scientific impact of the conducted research involves the creation and application of a methodology for reliable determination of the insurance benefit among the enterprises of the IT sector.

Keywords: tax benefits; IT industry; IT-technology; tax expenditures; income tax; innovative benefits; import substitution in IT (search for similar items in EconPapers)
JEL-codes: H71 L86 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:aiy:jnljtr:v:9:y:2023:i:3:p:376-397

DOI: 10.15826/jtr.2023.9.3.148

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