In this paper I have examined the mechanisms of tax competition. Due to limited taxation powers of regional governments, there is no vertical tax competition in the current Russian practice. Nowadays, the sub-federal level authorities have the power to differentiate tax rates and provide additional tax relief for profit organizations. I have analyzed business property tax, transfer tax, land tax, tax on personal property and other taxes to be paid under the simplified tax system. The analysis of legislative acts of the Russian Federation in respect of the said taxes leads to the conclusion on the presence of horizontal tax competition in regions. The study illustrates the difference of regions as per tax rate differentiation. Most of the benefits aim at improving the investment attractiveness of territorial entities.
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