Fiscal Federalism and Personal Income Tax Redistribution: Case of Russia's Regions

The purpose of this study is to create a calculation mechanism for differentiation of personal income tax revenues between budget levels. For research purposes the authors tested the hypothesis: when distributing revenues from personal income tax between Federal and regional budget levels, it is possible to use the calculation mechanism, taking into consideration a number of delimitative criteria. Economic analysis, synthesis and the analog approach allowed to quantitatively interpret seven theoretical criteria dividing income tax within levels of the budget. Using time-series methods, quantitative and correlation analysis, integral indicator we evaluated each criteria received for 83 regions of the Russian Federation for the period between 2010 and 2014 and identified the possibility of splitting revenues from personal income tax between the Federal and regional budgets. Nizhny Novgorod region, one of the regions of Russian Federation, was taken as an example in the course of study. Methods of factor analysis allowed to test the algorithm built for dividing tax revenues, confirming their relevance and significant value. As a result of the study, the authors identified two main features of the distribution of personal income tax in Russia between the Federal and regional budgets, at a ratio of 10% to 90% or 20% to 80%, respectively. These changes in fiscal federalism policy would create additional incentives for the development of the economy in Russia and improve the quality of life of the population.