Influence of the industrial structure of economy on the risk component of regions' tax system: case of Russia

The aim of this research is to determine the influence of industrial structure of regional economy on its tax system risk level. Our study embraces the data of 83 Russian regions in 2006-2014. For assessment of the tax system risk level we employed the portfolio approach by H. Markowitz, suggesting that regional "portfolio" consists of main economic activities. It allowed us to decompose the Russian regions' tax systems risks, to evaluate the contribution of various activities to it and to determine the critical zones of instability. We evaluated the level of diversification of regional economies using a range of indices. Finally, we established positive correlation between the regions tax systems risk and return as well as positive impact of economy diversification on stability of the tax systems of Russian regions. But both dependencies demonstrate some heterogeneity due to regional peculiarities. Our results may be applicable in management of tax system risks at the regional level.