Budget donors in deficit

The number of donor regions has declined insignificantly but most of them will face budget deficit in 2020.

Despite the economic downturn, declining tax and non-tax budget revenues and growing budget transfers, the number of federal budget donors decreased, contrary to ACRA's expectations, by only three¹ in the three quarters of 2020 compared to the same period in 2019. In this context, "donors" exclude regions that do not receive subsidies to stabilize their budgets, but include regions that contribute (in taxes and charges²) to the federal budget more than they receive (in gratuitous receipts of all kinds).

The regions that, in our opinion, have lost their donor status include Belgorod Region, the Republic of Sakha (Yakutia) and Novosibirsk Region. The volume of gratuitous receipts received in the three quarters of 2020 to the consolidated budgets of these regions exceeded the volume of taxes collected in them in favor of the federal budget.

At the same time, according to our estimate, 36 regions became donors in the first nine months of 2020.

In general, over the past three years, the list of donor regions has not changed dramatically. About 40 constituent entities (up to 43, in some years) annually contributed to the federal budget more tax revenues than budget transfers they received back. The five leading donors in 2017–2019 were: Khanty-Mansiysk Autonomous Okrug–Ugra (about RUB 3 tln of net contributions³ to the federal budget in 2019), Moscow (RUB 1.5 tln), Yamalo-Nenets Autonomous Okrug (RUB 1.3 tln), St. Petersburg (RUB 0.7 tln) and the Republic of Tatarstan (RUB 0.5 tln). Taken together, these regions paid RUB 7 tln to the federal budget in 2019 (71% of all tax collections).

According to our estimates, the volume of taxes collected in regions to the benefit of the federal budget in the first nine months of 2020 decreased by 15% (RUB 1.4 tln) y-o-y. Taxes and charges for using natural resources fell the most (-35%, or RUB 1.7 tln), mainly MET for fuel and energy minerals; VAT receipts also decreased but not so significantly (-4%). In contrast, other tax revenues (income tax, excise taxes and other federal taxes and duties) increased.

A major decline in federal budget revenues was observed in the largest oil and gas producing regions. However, the donor status of these regions is quite stable because federal transfers have never been significant for most of them. For example, net contributions from Khanty-Mansiysk Autonomous Okrug–Ugra decreased by 36% to RUB 1.5 tln in 9M 2020, but the volume of federal transfers granted to this region amounted to only RUB 17 bln. In Yamalo-Nenets Autonomous Okrug, the decrease amounted to RUB 303 bln (-29%), and the volume of federal transfers was about RUB 10 bln. Despite a decrease in tax revenues, these oil and gas regions, as well as a number of other producing regions (Krasnoyarsk Krai, Samara and Sakhalin Regions), showed budget surpluses in the three quarters of 2020.

Other donor regions with significant oil and gas production volumes were less fortunate, as budget deficits of the Republic of Bashkortostan, Tyumen Region, Perm Krai, Irkutsk Region, Tomsk Region, and the Republic of Tatarstan varied from RUB 7 bln to RUB 16 bln in nine months of 2020. At the same time, the volume of net contributions from Tatarstan to the federal budget decreased so much that Moscow Region and Krasnoyarsk Krai have managed to outstrip the republic in terms of the volume of budget revenues. For the first time since 2016, the Republic of Tatarstan could not get into the top five donor regions. Nevertheless, Tatarstan transferred to the federal budget six times more than received from it. The republic remains a permanent donor for the federal budget.

Donor regions with more diversified tax revenues showed, regardless the current tough economic conditions, a slight increase in their net contributions to the federal budget for three quarters of 2020. Moscow's contributions grew by RUB 42 bln (+4%) reaching the total of RUB 1.2 tln, St. Petersburg's increase amounted to RUB 125 bln (+24%), totaling RUB 637 bln, Moscow Region's increase was RUB 5 bln (+2%), totaling RUB 284 bln. However, budgets of all three regions were in deficit at the end of nine months of 2020.

In view of the above, 23 out of 36 donor regions showed a budget deficit in the three quarters of 2020. Some of them have no reserves high enough to cover the deficit; therefore, many regions may face a debt increase by the end of 2020.

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¹ Latest comparable periods (nine months) were used. More relevant information (for 10 months of 2020) is available, but in 2019, reports were sent quarterly.
² Excise taxes on excisable goods registered by the Federal Tax Service do not include some excise taxes registered by the territorial bodies of the Federal Treasury Department, and therefore it is not possible to determine the exact amount of excise taxes collected to the federal budget in regions.
³ Net contributions to the federal budget include regions' contributions net of back transfers from the federal budget.

Table 1. Regions with the highest contributions* to the federal budget in nine months of 2020 (RUB mln)

Region	Contributed  in 9M 2020	Contributed in 9M 2019	Federal transfers to the region  in 9M 2020	Federal transfers to the region  in 9M 2019	Deficit/surplus of the region's consolidated budget in 9M 2020
Khanty-Mansiysk Autonomous Okrug— Ugra	1,480,850	2,315,571	16,873	15,734	17,023
Moscow	1,263,181	1,198,805	48,302	25,639	-185,320
Yamalo-Nenets Autonomous Okrug	736,032	1,032,774	9,562	3,269	5,754
St. Petersburg	668,204	527,264	31,264	15,136	-2,955
Moscow Region	341,968	322,808	58,318	44,441	-51,810
Krasnoyarsk Krai	313,770	336,725	36,707	19,132	19,264
Republic of Tatarstan	300,221	397,228	49,624	21,551	-15,864
Samara Region	214,918	273,784	29,539	11,964	8,025
Sakhalin Region**	190,685	210,821	7,572	10,381	19,059
Perm Krai	172,952	197,366	32,247	12,575	-10,342
Republic of Bashkortostan	167,481	184,493	61,725	31,149	-15,816
Irkutsk Region	164,698	214,970	40,609	23,715	-9,059
Orenburg Region	163,205	242,250	26,850	14,559	-5,567
Leningrad Region	136,283	139,496	13,131	6,195	-1,918
Tyumen Region	111,059	146,299	10,157	5,481	-12,947

* It is assumed that all mineral extraction taxes are categorized as contributions to the federal budget.
** Including taxes established by special taxation regimes.
Source: Federal Treasury Department, Ministry of Finance of Russia, ACRA's calculations