The Ministry of Finance will take from the regions all additional revenues associated with a 3.5-fold increase in the tax rate on the extraction of metals and raw materials for fertilizers. Subjects from next year will receive 17% of fees instead of the current 60%. This is stated in the amendments to the Budget Code, adopted by the State Duma on September 29 in the second reading (Izvestia analyzed the document). At the same time, they most likely will not lose money – an increase in the rate levels out a decrease in the regional share… The centralization of income in this case is justified, experts say… This will allow solving the financial problems of the country as a whole, and not of individual subjects.
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Raised for themselves
On Monday, September 28, the State Duma Committee on Budget and Taxes considered the proposals for the second reading of the Finance Ministry’s bill to amend the Budget Code and recommended their approval.
The amendments were made by a group of deputies, it follows from the text of the document. They radically change the division of rental income between the center and the regions. According to the current rules, the budgets of the subjects receive 60% of the mineral extraction tax (MET) from the extraction of any raw material, except for oil, gas, diamonds and various building materials. Starting next year, the regions will receive 17% of the main types of export minerals – multicomponent ores (nickel, aluminum), potassium salts.
On September 29, the State Duma adopted the amendments in the second reading. The head of the Committee on Budget and Taxes Andrey Makarov, in his report, commented on them extremely succinctly. The document, he said, passed all the necessary examinations and was agreed with the regions. In fact, there was no discussion of the changes – the amendments did not raise questions from the deputies. In the third reading, the bill will be considered on the 30th.
As a source close to the government explained to Izvestia, nominally, in monetary terms, the regions will receive exactly as much income from the mineral extraction tax as they planned before the decision of the Ministry of Finance to increase the rate on the extraction of metals and raw materials for fertilizers.
Earlier, the department announced a 3.5-fold increase in taxes on the extraction of these types of minerals. The corresponding bill was also adopted in the second reading. A decrease in the share of revenues to regional budgets is required in order for the federal treasury to receive all additional revenues from the increased burden on metallurgists and fertilizer producers, the source explained.… According to official estimates, this rate hike should generate about 60 billion rubles for the center in 2021.
However, in response to the negative reaction from business, the government made a number of concessions. In particular, new projects of metallurgists and fertilizer producers, according to which agreements on the protection and encouragement of investments will be concluded, will be exempted from the increased rate.
The 3.5-fold increase in the tax on the extraction of ore and raw materials for fertilizers is only part of the large-scale tax maneuver of the Ministry of Finance. The mobilization program also included an increase in the load and the abolition of privileges for oil workers, an increase in excise taxes on tobacco products, a transition to a progressive personal income tax, and a collection from the owners of large deposits and bonds. In total, this should bring 1.8 trillion rubles to the federal treasury over three years.
Budget revenues for 2021–2023 are projected at 18.7, 20.6 and 22.3 trillion rubles, respectively. The total deficit for three years will amount to almost 5.5 trillion rubles.
Logical imbalance
Previously, we believed that some of the regions might gain a little from the Finance Ministry’s maneuver – worsening conditions for the tax on additional income would reduce the profit tax (almost entirely goes to the budget of the constituent entities – Izvestia), but the growth of the MET would balance this, the head told Izvestia of the ACRA regional ratings group Elena Anisimova. However, now you can forget about the balance – although the collection from the extraction of solid minerals will grow 3.5 times, the regional share of this type of income will also decrease to the same extent, the expert noted. I.e, on severance tax subjects will remain “with their own”, but on income tax they will obviously have losses, Elena Anisimova is sure.
According to ACRA, the Chukotka Autonomous District will suffer the most – in its own revenues, MET from metals accounts for 18%, Krasnoyarsk Territory (6%), Magadan Region (4%) and a number of others.
The federal center is making efforts to concentrate resources at its disposal, which is due to the need to make up for the losses of the first half of the year and create a reserve in case of a “second wave”, added Andrey Piskunov, managing director of the corporate ratings group of the NKR agency. Leaving additional funds in the hands of the subjects means giving up the ability to quickly maneuver finances…
The centralization of income, although it implies the solution of the problems of the country as a whole at the expense of the resources of the federal budget, in fact, fetters the regional authorities, said Vladimir Klimanov, director of the RANEPA Regional Policy Center. The more a subject has its own income, the easier it is to build a long-term strategy for its development. Even purely psychologically, it matters for governors whether their region earns on its own or has to rely on help from the center all the time., the specialist is sure.
Earlier, First Deputy Prime Minister Andrei Belousov, speaking before the Federation Council in the format of a government hour, estimated the assistance to the subjects from the center this year at 3.5 trillion rubles. This is 800 billion more than originally planned.
Izvestia sent requests to the regions with a request to comment on the new rules for the distribution of income.
In the Vladimir region, the Republic of Mari El and the Khanty-Mansi Autonomous Okrug, they declared a neutral attitude to the changes, since the minerals that are affected by the amendments are practically not mined on their territory. The Yamalo-Nenets Autonomous Okrug and the Samara Region noted that, although the proportion between the federal and regional budgets is not changing in favor of the latter, the growth of the total amount of mineral extraction tax compensates for this.
Izvestia also contacted the Ministry of Finance with a question about the reaction of subjects to innovations and plans to compensate for lost income.