Subject The article underpins the need for tax incentives for neo-industrial development and import substitution as a dual-purpose process. Objectives The goal of the research is to develop practical recommendations to improve the Russian legislation in the field of taxes and charges to increase its stimulating role in import substitution and neo-industrial development. Methods The research rests on the comparison of existing laws and regulations of the Russian Federation on taxation of manufacturing industry's business entities and requirements of the World Trade Organization's agreements, and the analysis of public reports of manufacturers of self-propelled vehicles and trailers. Results The potential of tax instruments to encourage import substitution purposes is underutilized, with greater focus on favorable tax regime for exporters. However, the WTO rules establish limitations on tax preferences for exporters. The increased cost of fuel and energy resources in the domestic market and the introduction of disposal fee for manufacturers of self-propelled vehicles and trailers have an adverse effect on industrial production, import substitution and neo-industrial development. Conclusions The paper recommends using the tax incentives within an industrial cluster. It offers six main directions of tax incentives for import substitution depending on the stage of life cycle of manufactured items.
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