Scholarly record

FINANCIAL INDEPENDENCE OF MUNICIPALITIES AND LOCAL BUDGETS

Elena Shcherban, M. Abramova, A. Petrov, D. Yanin

Abstract

One of the critical questions in local authorities both in Russia and in many other countries with a decentralized fiscal system, is an increasing level of financial resources concentration in central budgets that reduces the impact of municipal governments in carrying out their tasks in the local public sector. Using economic and statistical methods this study shows the dominant role of regulating revenues and the low proportion of local taxes and charges in the municipal budgets’ revenue structure. The level of budget independence for local authorities has been estimated in the research and the authors came up to the conclusion on reducing the budget independence of the municipalities in Russia. The budgetary empowerments of the municipalities in Russia and European countries have been reviewed and it was found out that the level of local authorities’ sphere of budgetary funds disposal has diminished and the implementation of an independent budget policy by local government has decreased. It was found out that the existing tendency to transfer the expenditures from the central state level to the municipal one without relevant revenue sources, turns previously self-sufficient local budgets into subsidized. The ways of optimizing the incomes of municipal budgets and the tools for increasing the level of financial independence of local authorities have been substantiated in the research. Among the most important of them are: the need for a clear distribution of competence to address specific tasks between central authorities and local governments, which should be reflected in the state legislation, expanding the lists of local taxes and fees, while strengthening their fiscal role. It was proved that such tax revenues, which may be influenced by local government have to be fixed for local budgets.

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