THE TAXATION OF NATURAL-RESOURCES AND THE FUTURE OF THE RUSSIAN-FEDERATION

This paper is an examination of the vertical and horizontal division o f revenues from taxing natural resources, a crucial issue for the futu re of the Russian Federation. Assigning resource revenues entirely to subnational governments would undermine the fiscal capacity of the cen tral government. Resources are so concentrated geographically that all ocating revenues primarily to jurisdictions where production occurs wo uld create large fiscal disparities among subnational governments. Eit her of these policies could encourage the disintegration of the Federa tion-as could a contrary policy. After a brief review of the concept o f economic rent, the theory of tax assignment is examined and applied to taxes on natural resources. Whereas economic arguments tend to favo r centralization of resource rents, political realities suggest decent ralization. It is noted that there will be many claimants to potential rents from Russian natural resources, including consumers, native peo ples, suppliers of oilfield equipment, pipeline companies, foreign inv estors, and managers and employees in the energy sector and its suppli ers. Last, consideration is given to whether resource rents should be placed in trust funds, by either native peoples or the government of p roducing regions, and the experience of Alberta and Alaska in this are a is reviewed.