ALEXANDER DERYUGIN ON PRIORITY PIT TRANSFER TO REGIONAL BUDGETS

“A unified tax is user friendly for the taxpayer: thus, if there are overpayments, they are immediately compensated by payments on other taxes and there is no need to return money to the budget, paid, for example, on income tax. Overpayments often occur there. There are no overpayments on personal income tax, this tax is always paid ex post.

Two taxes are principal for regional budgets: personal income tax and income tax. Together they generate more than 50% of all tax revenues. When there were large refunds at the end of the previous year, there was a situation when a region was expecting taxes, but did not receive them or received them in small quantity.

It can be assumed that a region had an overpayment of income tax. They were expecting a personal income tax to enter the budget, but the tax office collected the overpayment against the personal income tax, therefore, the region received nothing or received small amounts. An unexpected cash gap arose and it was necessary to bridge it, for example, to take a budget loan (for which, incidentally, the Federation has limits). In order to make all this at least predictable, such an order of crediting taxes to the budgets of the regions was invented.

Anton Siluyanov, Minister of Finance, as far as I remember, considered this initiative as a working version. The point is to take personal income tax out of the scheme of automatic mutual settlements: first pay all liabilities on this tax and then consider the clearing. Everything concerning income tax, overpayments, and so on, will be solved under other taxes.

Then, clearing will go through property tax, mineral extraction tax, and so on. This solves the problem of determinism of the revenues of a large part of tax incomes. The income tax is still actually a random number and it can be predicted only at the level of the year, while it is easy to be wrong almost twice there. Personal income tax is forecasted more or less accurately and is more or less stable. However, it was decided to leave this part of regional revenues to be projected.

In my opinion, this change will be especially evident for the more affluent regions, where the income tax is large and deductions sometimes just engulfed the personal income tax. In case of the introduction of such a procedure of tax transfer, it turns out that incomes of the region will become more predictable. If the region needs to pay back tax deductions, it will not be done immediately at the expense of the entire amount of personal income tax but there will be installments of several months, providing the region with the opportunity to accumulate the necessary amount of other taxes.”