Revenues of Russian Subfederal Budgets under the Pandemic: A Spatial Reversal

The object of research is subfederal budget revenues in Russia, i.e., the revenues going into the consolidated budgets of the federal subjects. The aim of the study is to analyze the impact of the pandemic on the subfederal budget revenues and to assess the contributions of various sources (taxes, non-tax revenues, transfers and their components) to their change. The data on moving annual revenues and their components with a 1-month shift are used to construct linear time regressions for 85 federal subjects of the Russian Federation and the city of Baikonur from 2015 to March 2020. The regressions are applied to forecast “non-pandemic” subfederal budget revenues during the period of the pandemic (April 2020 to June 2021). By decomposing the deviations of the actual revenues from the forecast ones, the contribution of various sources to the changes in the subfederal budget revenues amid COVID-19 is determined. It is shown that the oil-producing regions of Russia are most vulnerable to the pandemic. Meanwhile, an abnormally high growth in budget revenues is observed in some regions of the Far Eastern Federal District. Tax revenues have the strongest negative impact on the change in the subfederal budget revenues, with the greatest losses being attributed to profit tax and smaller losses being associated with corporate property tax and special tax regimes. Personal income tax partially compensates for these losses. The changes in the taxes on goods and services are extremely uneven. The behavior of non-tax budget revenues resembles that of taxes, with the greatest losses being attributed to proceeds from the use of state properties and from the sale of assets. Interbudgetary transfers compensate for both the shortfall in revenues and for the growing subfederal budget expenditures. Their distribution reveals three motives: mitigation of the pandemic’s detrimental implications, control over interregional imbalances, and political preferences. The federal subjects of the North Caucasian Federal District and some other lagging regions of Russia receive the largest share of extra transfers. The composition of the transfers shows a substantial increase in the share of subsidies and of the so-called other interbudgetary transfers, which suggest a proactive participation of the state in the implementation of national projects and in the production of public goods. A decrease in the share of equalization grants implies a reduction in non-targeted aid allocated by uniform rules. This indicates the increased dirigisme function of the Russian state in the economy. The results we obtained can be applied both to control the budget revenues of regions and to regulate interbudgetary relations during crises.