Fiscal Mechanism for Stimulating Domestic Production in Some BRICS and European Countries

Financial journal. 2023. Vol. 15. No. 6. P. 123–135.

Vladimir V. Olkhovik, Afanasev R., Juchnevicius E., Tatiana N. Malofeeva

The issue of stimulating domestic production is multifaceted and has a long history of study. At present, it is particularly relevant due to the introduction of restrictive measures, including the termination of supplies of a number of foreign goods to the Russian Federation. As one of the possible measures to increase the production of goods by Russian companies and entrepreneurs, the authors consider a new incentive mechanism of redistribution of value added tax (VAT) received by the federal budget, which implies the direction of the amounts of social grants taking into account the economic activity of the region associated with the production of value added on its territory. The purpose of the article is to justify a new methodology that includes a financial mechanism for redistributing the amounts of VAT in the form of grants to producers, aimed at creating effective budgetary incentives for regions to organize their own production of goods. For this purpose, the experience of VAT distribution in two BRICS countries — Brazil and China — is considered. In addition, the article summarizes effective measures of Germany, France, Greece, Austria and Norway to optimize calculation and payment of VAT, which resulted in economic growth.

Discussion. One notable approach proposed by the authors to create a new incentive mechanism for redistribution of VAT revenues to the federal budget. This mechanism involves the allocation of social grants depending on the economic activity of the regions, particularly related to the production of valueadded goods on their territory. This approach represents a departure from traditional fiscal policies aimed at aligning incentives with local production.

Results. This research represents a significant contribution to the ongoing debate on stimulating domestic production. By advocating a new mechanism of VAT redistribution and drawing on international experiences, the study seeks to address the challenges posed by restrictive measures and promote economic growth in the Russian Federation.

Keywords: налог на добавленную стоимость (НДС), экономический рост, страны БРИКС, economic growth, стимулирование, перераспределение, BRICS countries, economic activity, экономическая активность, redistribution, commodity production, stimulating, value added tax, social grants, budgetary incentives, VAT distribution, товаропроизводство, распределение НДС, бюджетные стимулы