ALEXANDER DERYUGIN: "EVENTUALLY, REGIONS’ OWN REVENUES MIGHT GROW, BUT THIS CANNOT BE PREDICTED"
Alexander Deryugin, Researcher of the Budget Policy Department of the Gaidar Institute, shared his opinion in the op-ed for “Davydov.Index” that regional budgets may receive additional revenues.
“One should bear in mind that a three-year budget is rather indicative. Frankly speaking, I am surprised by the very fact of a still persisting three-year format of the budget, because it is clear that parameters of at least two years of the planning period will be substantially adjusted. This will happen simply because the input data will be adjusted. On the whole, I would not debate about the Accounts Chamber clarification related to regional revenues, as it is still largely a coffee cup reading.
As for the revenues of regional budgets: first, 103 billion is a large figure as such, but compared to the size of the budget, it is not much. The consolidated budget of the regions amounts to nearly Rb20 trillion with 100 billion constituting only 0.5%. That's nothing. Likewise, we must not forget that subsidies for fiscal equalization represent the main source of financial aid to regional budgets. The amount of these subsidies should be indexed to the rate of inflation. Indeed, they are indexed, but not to the actual rate of inflation, I assume.
The current inflation this year is around 14%, and the indexation reaches the planned level, which was just above 4%. In other words, everything is sort of indexed, but without further adjustment for the difference between the actual and estimated inflation rate. Thus, the equalization transfers and transfers on the whole are not growing as fast as they should. They lag behind inflation.
Therefore, regional own revenues might grow, but it cannot be predicted, because it is not realistic now to make forecasts for more immediate events. At the end of this year, restrictions on Russian oil exports to the European Union will come into force, and early next year there will also be restrictions on petroleum products. However, the EU countries are now also discussing the introduction of a ceiling price for oil (and we make promises that we will not sell it to those who introduce such a price). It is still unclear how it will all work. This is the first time that we faced this situation. Thus, there is a complete uncertainty as to what the outcome will be. The risks associated with this uncertainty are very significant since the main exports in Russia are oil, oil products and gas. I fail to understand then what the revenues will be for the regional budgets. On the one hand, the main oil and gas revenues flow to the federal budget, while the profit tax goes to the regional budget. However, profit tax is also largely generated fr om oil and gas companies.
When these companies receive adequate revenues, this has a multiplier effect that spreads throughout the economy. Thus, the financial condition of large state-owned companies affects the financial situation of even those regions wh ere these companies do not exist. Therefore, there is great uncertainty regarding the revenues the regions will receive next year. The figure announced by the Accounts Chamber is simply linked to a specific economic development forecast prepared by the Ministry of Finance. Eventually, since the level of uncertainty of such a forecast is extremely high, it makes no sense to draw any profound conclusions about this additional 103 billion".
As for the revenues of regional budgets: first, 103 billion is a large figure as such, but compared to the size of the budget, it is not much. The consolidated budget of the regions amounts to nearly Rb20 trillion with 100 billion constituting only 0.5%. That's nothing. Likewise, we must not forget that subsidies for fiscal equalization represent the main source of financial aid to regional budgets. The amount of these subsidies should be indexed to the rate of inflation. Indeed, they are indexed, but not to the actual rate of inflation, I assume.
The current inflation this year is around 14%, and the indexation reaches the planned level, which was just above 4%. In other words, everything is sort of indexed, but without further adjustment for the difference between the actual and estimated inflation rate. Thus, the equalization transfers and transfers on the whole are not growing as fast as they should. They lag behind inflation.
Therefore, regional own revenues might grow, but it cannot be predicted, because it is not realistic now to make forecasts for more immediate events. At the end of this year, restrictions on Russian oil exports to the European Union will come into force, and early next year there will also be restrictions on petroleum products. However, the EU countries are now also discussing the introduction of a ceiling price for oil (and we make promises that we will not sell it to those who introduce such a price). It is still unclear how it will all work. This is the first time that we faced this situation. Thus, there is a complete uncertainty as to what the outcome will be. The risks associated with this uncertainty are very significant since the main exports in Russia are oil, oil products and gas. I fail to understand then what the revenues will be for the regional budgets. On the one hand, the main oil and gas revenues flow to the federal budget, while the profit tax goes to the regional budget. However, profit tax is also largely generated fr om oil and gas companies.
When these companies receive adequate revenues, this has a multiplier effect that spreads throughout the economy. Thus, the financial condition of large state-owned companies affects the financial situation of even those regions wh ere these companies do not exist. Therefore, there is great uncertainty regarding the revenues the regions will receive next year. The figure announced by the Accounts Chamber is simply linked to a specific economic development forecast prepared by the Ministry of Finance. Eventually, since the level of uncertainty of such a forecast is extremely high, it makes no sense to draw any profound conclusions about this additional 103 billion".