Estimation of Timber Rent and the Efficiency of Increasing Rental Payments in Russia

All opinions expressed here are those of the authors and not those of the Economics Education and Research Consortium Research dissemination by the EERC may include views on policy, but the EERC itself takes no institutional policy positions Though Russia is very rich in natural resources, the share of natural resource rental payments in budget revenues is very low, less than 4% of the consolidated budget. Like many other natural resources in Russia, timber is underpriced , due, largely, to low stumpage fees. In this paper, timber rent in Russia is estimated, using normative data on logging as well as data on timber auctions. The prospects of shifting the tax burden from labor to timber rent are analyzed. It is shown that stumpage fees in Russia can be substantially increased, making it possible to lower other distortionary taxes (e.g., payroll tax), thus raising the efficiency of the tax system. Acknowledgements. Helpful comments and recommendations by Erkki Koskela and Judith Thornton are gratefully acknowledged.