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Finance and Credit
 

The specifics of using Tax Increment Financing technology for infrastructure project financing

Vol. 21, Iss. 3, JANUARY 2015

PDF  Article PDF Version

Available online: 18 January 2015

Subject Heading: Taxes and taxation

JEL Classification: 

Pages: 47-55

Zhdanchikov P.A. National Research University - Higher School of Economics, Moscow, Russian Federation
peters8@yandex.ru

Importance Infrastructure projects make a basis of economic capacity building of the society. Infrastructure project financing is one of the most urgent problems of the modern Russian economy due to intensive growth of social and economic infrastructure in various regions of the country. In these conditions, searches for new sources and mechanisms of project financing, including under public-private partnership, are of special interest. One of such mechanisms is the Tax Increment Financing (TIF) mechanism, which is widely used abroad, but very uncommon in Russia.
     Objectives The main objective is to consider the possibility of using Tax Increment Financing techniques in the modern Russian economic environment. The tasks include the study of foreign experience and analysis of applying the mechanism in Russia.
     Methods Using the methods of comparative analysis and organizational and legal modeling, I examined various aspects of TIF mechanism application within a public-private partnership. I identified the sectors of economy, where TIF mechanism application would be more efficient.
     Results The results include the analysis of foreign experience in using Tax Increment Financing techniques, classification of concession agreements, the structure model of public-private partnership for using the TIF mechanism, the analysis of legal framework for applying the new financial mechanism.
     Conclusions and Relevance I conclude on the need to apply the Tax Increment Financing mechanism in the Russian practice of large-scale infrastructure project financing. I emphasize insufficient enforceability and ambiguous prospects for using the new financial techniques in the modern Russian environment.

Keywords: public-private partnership, infrastructure project, concession, life cycle, project, operator agreement, deferred tax, payments, Tax Increment Financing

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