Template-Type: ReDIF-Article 1.0
Author-Name: Vladislav V. Bukharsky
Author-Email: bukharsky@nifi.ru
Author-Workplace-Name: Financial Research Institute, Moscow 126006, Russian Federation;  HSE University, Moscow 101000, Russian Federation;  Masaryk University, Brno 60200, Czech Republic
Title: Fiscal Decentralization and Incentives of Local Authorities in the Russian Federation
Abstract: This article examines the impact of intraregional fiscal decentralization on fiscal incentives for local governments in the Russian Federation. It is expected that decentralization contributes to the economic development of territories through two channels: 1) a higher level of budgetary (tax) decentralization gives more opportunities to local authorities to realize the economic potential of the territory; 2) stable decentralization of revenue sources preserves incentives for local authorities to realize such opportunities. In comparison with the widespread approach to measuring these incentives in terms of gross regional product, the author uses indicators of entrepreneurship, the development of which is mostly within the competence of local authorities. As a measure and stability of decentralization, the norms for deducting revenues to local budgets are used. No clear and conclusive evidence of the impact of decentralization is found: due to the low financial security of subnational budgets overall, the transfer of standards can rather be understood as financial assistance to the lower budget, in particular because the size of the average transferred standard grows with the level of subsidies in the region. At the same time, there are certain positive results: the very fact of the transfer of the revenues levied in connection with the application of the simplified taxation system is accompanied by an increase in entrepreneurial activity in the region. A similar effect is exerted by the stability of the revenues on personal income tax and corporate property tax. In general, it can also be pointed out that local authorities have low indicators of the level and stability (rigidity) of budget decentralization.
Classification-JEL: H61, H70, H71
Keywords: fiscal decentralization, hard budget constraints, soft budget constraints, fiscal incentives, local governments, entrepreneurship
Journal: Finansovyj žhurnal — Financial Journal
Pages: 114-129
Issue: 2
Year: 2021
Month: April
DOI: 10.31107/2075-1990-2021-2-114-129
File-URL: https://www.finjournal-nifi.ru/images/FILES/Journal/Archive/2021/2/statii/08_2_2021_v13.pdf
File-Format: Application/pdf 
Handle: RePEc:fru:finjrn:210208:p:114-129