Budget coup: the federal center will give more taxes to the regions

Regions, on the other hand, could apply for the money earned after it was distributed by the Ministry of Finance. This made it easier and more convenient to build the vertical of power until 2021.

Victoria Pavlova

The federal center is the main one in the distribution of cash flows. Everyone should depend on Moscow. Over the past two decades, these statements have become an axiom. It originated in the early 2000s, when the system of Russian government was not yet established, but there was already an understanding of the need to build a vertical of power. Dmitry Kozak proposed a major reform of local self-government and inter-budgetary relations, which would clearly delineate the powers and revenues of municipalities, regions, and the federal center. Additional powers were given to the regions in 2003, but the budget reform was implemented only in 2005, when the Ministry of Finance was headed by Alexei Kudrin. And she turned it not at all where expected.

If in 1999 44% of tax revenues were sent to the federal budget, then by 2007 the center's share had grown to 66.2%. The most stable taxes began to go to the federal budget, which almost did not depend on the ongoing crises: the mineral extraction tax (MET) and VAT.

And only subsequent transfers in the form of subsidies, grants and subventions allowed the regions to form 58.9% of the consolidated budget. So in the first half of 2021, federal budget revenues from taxes and excise taxes increased by 41.7% compared to the same period last year, and the consolidated budget revenues of the constituent entities of the Russian Federation - only by 23.5%.

For example, the recent proposal of Deputy Prime Minister Andrey Belousov to increase the severance tax for metallurgists without additional conditions fits perfectly into this concept of strengthening the center. That was supposed to increase revenues to the federal budget, but reduce the net profit of companies, from which taxes are paid to the budgets of the constituent entities of the Russian Federation.

However, this week, State Duma deputies quietly adopted amendments to the Budget Code in the third final reading, which turn everything upside down. Now 17% of the income from the mineral extraction tax on ferrous and non-ferrous metals and mineral fertilizers, as well as 17% of the income from the excise tax on liquid steel will go to the budgets of the constituent entities of the Russian Federation. The regions will also receive 25% of the MET for coking coal. Plus, there will be a castling with alcohol excise taxes: the regions will take their share of 50% of the excise taxes on middle distillates, but they will give 4% of the income from the sale of alcoholic beverages stronger than 9 degrees.

And that is not all. Legislators gave the regional authorities some freedom in terms of borrowing. Starting next year, the volume of the state debt of the constituent entity of the Russian Federation may exceed the limit established by law by the amount of budget loans from the federal budget.

The status of the National Welfare Fund has also changed. Now it is not just an airbag, but also a source of funds for infrastructure projects. Today, the fund's liquid assets in excess of 7% of GDP can be sent to investments. Already next year this level will rise to 10% - there will be no money for new investments.

But it will be possible to quickly use the NWF to cover the federal budget deficit without the adoption of special laws. This will allow the government, in agreement with the parliamentary commission, without introducing amendments to the budget law, to allocate additional interbudgetary transfers to 10 regions with the lowest budget security.

As long as there was a lot of money in the country, the government could turn a blind eye to how long and thorny path the funds go until they reach regional and local budgets. One could ignore the emerging cash gaps - if necessary, the regions could always either wait or borrow the required amount. But the pandemic, which brought along a lot of unforeseen expenses, showed that it is very difficult for regions, republics and territories to live without their own income. Money is needed right here and now without the slightest delay. Moreover, it is a matter of life and death for thousands of people in need of expensive medical care.

The government, of course, last year provided additional transfers in the amount of more than 1 trillion rubles, but this came as a shock to the federal budget. Here Finance Minister Anton Siluanov had a problem - how to patch up the holes in the federal budget.

Now the main question is: will the authorities decide on further reforms? The measures taken are revolutionary in nature, but applicable to a small number of regions where metallurgy and mining are developed. What about the rest?