Increasing the Fiscal Autonomy of Regions: Reforming the Distribution of Tax Revenues in the Budget System of Russia

This study addresses the critical challenge of interregional fiscal disparities and the excessive financial dependence of Russia’s constituent entities on federal transfers. The primary objective is to develop and substantiate comprehensive measures to transform the allocation of tax revenues between the federal and regional budgets, thereby strengthening regional financial sustainability within the framework of competitive federalism. The research is highly relevant given the persistent spatial polarization of Russia’s economic development and the new fiscal conditions created by recent tax innovations. This work proposes a model that combines three changes: moving some value-added tax (VAT), giving some control over the mineral extraction tax (MET), and changing the investment tax deduction into a federal‑ regional partnership. The method uses a systematic approach, with comparative, statistical, and system reviews of official data from the Ministry of Finance of the Russian Federation for 2019–2024. The results show that regions rely on the federal government, with federal taxes accounting for 64.5% to 67.7% of regional budget money. The study estimates that giving 25% of domestic VAT to the regions could cover a large part of their federal transfers. The suggested change to the investment tax deduction includes setting up federal standards and a way to make it work better. The proposals are discussed within the context of current sanctions, claiming that the change of fiscal flows allows the federal center to focus on important priorities while making regions partners in growth. In conclusion, implementing these connected steps in place will help switch from a support‑based model to one that encourages competitive federalism, leading to a stronger and fairer federation. The findings suggest ways to change budget and tax laws.

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