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Fiscal Measures to Boost the Economic Development of Russian Territories

Author

Listed:
  • Alexander D. Andryakov

    (Economic Expert Group, Moscow 109012, Russian Federation; Financial Research Institute, Moscow 127006, Russian Federation)

  • Evgeniy A. Dombrovskiy

    (Ministry of Finance of the Russian Federation, Moscow 109097, Russian Federation)

Abstract

Two possible directions of fiscal measures aimed at improving Russian territories’ economic development are discussed in the paper: one at the level of largest agglomerations and another one at the regional level. It is widely accepted that agglomerations are “engines” of economic growth. The Strategy of Spatial Development of the Russian Federation until 2025 pays special attention to the development of agglomerations. However, the latter process has not only natural limitations, but also institutional ones arising from low fiscal independence of municipalities which form agglomerations. To overcome the institutional limitations, the paper proposes a set of fiscal measures, including a redistribution of tax revenues and expenditure obligations between the center of a given agglomeration and the region that contains it. The current fiscal mechanisms of stimulating economic development of Russian regions are analyzed. A mechanism of additional stimulation for regions to develop their own revenue base is proposed; it includes the transfer of receipts of VAT levied with a reduced rate of 10 % to regions in exchange for centralization of some part of corporate income tax in the federal budget. Different scenarios of this exchange are analyzed. It is shown that centralization of the corporate income tax amount corresponding to the 1 % rate in the federal budget in exchange for the transfer of VAT levied with a rate of 10 % to regions with a compensation mechanism within the transferred amounts is neutral to the federal budget and to budgets of the regions which receive equalization grants.

Suggested Citation

  • Alexander D. Andryakov & Evgeniy A. Dombrovskiy, 2020. "Fiscal Measures to Boost the Economic Development of Russian Territories," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 5, pages 99-113, October.
    • Handle: RePEc:fru:finjrn:200507:p:99-113
    DOI: 10.31107/2075-1990-2020-5-99-113
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    References listed on IDEAS

    as
    1. John M. Quigley, 2008. "Urbanization, Agglomeration, and Economic Development," World Bank Publications - Books, The World Bank Group, number 28042, April.
    2. Marina Malkina, 2014. "Study of the relationship between the development level and degree of income inequality in the Russian regions," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(2), pages 238-248.
    3. Nataliya V. Golovanova & Evgeniy A. Dombrovskiy, 2016. "Federal Center and Regions: Assignment of Powers Changes in 2005 - 2015," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 2, pages 41-51, April.
    4. Kudrin, Alexey L. (Кудрин, Алексей) & Deryugin, Alexander N. (Дерюгин, Александр), 2018. "Subnational Budget Rules: Foreign and Russian Experience [Субнациональные Бюджетные Правила: Зарубежный И Российский Опыт]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 8-35, February.
    5. Vladislav V. Bukharsky & Alexey M. Lavrov, 2017. "Impact Evaluation of the Equalizing and Stimulating Effects of Intergovernmental Transfers to the Subjects of the Russian Federation," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 1, pages 9-21, February.
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    Cited by:

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    2. Igor Yu. Arlashkin, 2023. "On the Possibilities of Tax Decentralization in Russia," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 3, pages 78-90, June.

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    More about this item

    Keywords

    agglomerations; fiscal equalization; regions; regional income; stimulation; intergovernmental fiscal relations; intergovernmental grants; VAT; corporate income tax;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing

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