CONTENTS
I.V. Nikonov, M.G. Arustamyan, O.R. Mukhametov, A.I. Votinov, S.A. Radionov
Transformation of Public Debt Structure by Creditors in Central Asian and South Caucasus Countries, p. 8-26
Abstract
The rapid growth of public debt in developing countries in recent years and the increasing risks associated with this process emphasize the importance of research in this area. The article examines one of the key aspects of public debt management — the structure of creditors’ debt portfolio. The object of the study is the public debt of four countries of Central Asia and three countries of the South Caucasus. The states of this region are important foreign economic partners of Russia, their contribution to mutual trade and realization of joint projects is growing. Their role in the global and regional economy is also expanding, including participation in major transport and logistics projects designed to increase the connectivity of Eurasia. The study is based on the data of international organizations on the total volume of public debt, debt to individual external creditors and the dynamics of macroeconomic indicators. The article examines changes in the structure of the main groups of creditors for each country over three long-term periods and analyzes similarities and differences in the observed structural shifts. It also decomposes the indicator of public debt dynamics and estimates the contribution of the economic growth factor and the effects of changes in countries’ debt to certain groups of creditors. The study identified the following key trends in public debt structural changes: 1) the declining role of bilateral loans from developed and developing countries since the 2000s; 2) the continued strong influence of debt raised from international financial organizations and development banks in most countries throughout the period under study; 3) in a number of countries, a gradual increase in market sources of debt financing (domestic and Eurobonds); the increasing role of loans from China — in the Kyrgyz Republic and the Republic of Tajikistan, etc. The study identifies reasons for these structural changes, and concludes with a discussion of the risks associated with the observed shifts in the structure of public debt.
Keywords: public debt, external debt, creditor structure, Central Asia, South Caucasus
JEL: F34, H63
For citation: Nikonov I.V. et al. (2024). Transformation of Public Debt Structure by Creditors in Central Asian and South Caucasus Countries. Financial Journal, 16 (5), 8–26 (in Russ.). https://doi.org/10.31107/2075-1990-2024-5-8-26.
© Nikonov I.V. et al., 2024
V.Yu. Dodonov
Inter-budget Relations in Kazakhstan: State and Main Trends, p. 27-42
Abstract
Balance of the state budget is one of the necessary conditions for the effective functioning of the budget system of the country. This balance is largely determined by inter-governmental fiscal relations and the resulting redistribution of financial resources between the central, regional and local levels of the budget system. Inter-budget relations in Kazakhstan over the past two decades have undergonesignificant changes, which further increased the relevance of research on this topic. Such aspects of inter-budget relations as the increase in the volume and specific weight of transfers from the republican budget to the budgets of lower state bodies, the growth of the number of subsidized regions, the reduction of revenues to the republican level from the regional level, caused special attention to this problem in the budget process of Kazakhstan. The article examines the state and development of inter-budget relations in Kazakhstan in terms of these aspects in order to identify the main trends of their transformation and assess their impact on the budget process. The article analyses the main parameters of inter-budget relations in Kazakhstan, reveals trends in the role of subsidies and exemptions from local budgets, and considers the dynamicsof the number of subsidized regions and donor regions of the republican budget. It is noted that there is no noticeable improvement in the situation at the level of regional budgets, despite the increase in their revenue base due to the transfer of a number of tax revenues to the local level in 2020. Based on the analysis, the author concludes that the situation in the sphere of inter-budget relations in Kazakhstan is deteriorating, which is manifested in a constant decrease in the number of donor regions and an increase in the number of regions receiving subsidies, an increase in the share of subsidies in the revenues of local budgets, and a decrease in the share of exemptions from local budgets in the state budget revenues. It is also noted that the imbalance of inter-budget relations leads to the complication of the budget process at the republican level, which requires the adoption of measures to further increase the financial independence of the regions.
Keywords: state budget, Inter-budget relations, local budgets, subventions, exemptions
JEL: H77
Funding: the study was financially supported by grant No. IRN AR23489872 “Monitoring of interethnic relations in the southern regions of Kazakhstan” of the Committee of Science of the Ministry of Science and Higher Education of the Republic of Kazakhstan.
For citation: Dodonov V.Yu. (2024). Inter-budget Relations in Kazakhstan: State and Main Trends. Financial Journal, 16 (5), 27–42 (in Russ.).
https://doi.org/10.31107/2075-1990-2024-5-27-42.
© Dodonov V.Yu., 2024
M.S. Makushkin
Yield Factors of Additional Tier 1 Bonds, p. 43-59
Abstract
Additional Tier 1 bonds (AT1 bonds) are hybrid financial instruments issued by banks under Basel III. In case of a threat to the financial stability of an institution, these bonds can be converted into equity or written down to help the bank meet capital requirements. AT1 bonds are designed to insure a bank against a potential capital shortfall and minimize the need for a regulatory bail-out. AT1 bonds gained new attention after the collapse of Credit Suisse (CS), when all outstanding AT1 bonds issued by the bank were written down to zero. This paper provides an overview of AT1 capital, compares the main types of AT1 bonds and describes their most common features. In addition, it quantifies the risk premium in AT1 bond yields and identifies the main factors underlying this premium. The analysis is supported by real data on AT1 issuance in Europe. It is shown that in the primary market investors demand a significant premium from banks for the additional risk embedded in AT1 bonds. The size of the premium depends mostly on issuer-specific factors such as issuer’s credit risk, capital ratio, stock volatility and asset size. On the contrary, security design turns out to be a less important pricing factor. The author compares the results before and after the CS crash and concludes that the CS AT1 write-down did not directly affect the pricing principles in the market. The results of the research may be useful both for investors looking for yield pickup in financial sector and for banks working on the optimal design for their AT1 bonds.
Keywords: AT1 bonds, contingent convertible bonds, bank capital, yield, Basel III
JEL: G12, G13, G21
For citation: Makushkin M.S. (2024). Yield Factors of Additional Tier 1 Bonds. Financial Journal, 16 (5), 43–59 (in Russ.).
https://doi.org/10.31107/2075-1990-2024-5-43-59.
© Makushkin M.S., 2024
V.V. Gromov
Establishment of Special Economic Zones after the Moratorium: Motives, Trends, Patterns, p. 60-77
Abstract
Improvement of the investment climate is one of the main priorities of the Russian tax policy, in which special economic zones (SEZ’s) play a significant role. The pace of their creation has increased significantly in recent years. The main idea, as always, is to attract investment. However, the more such zones appear, the more obvious becomes the gap in defining the strategic role of the SEZ regime, which has already been introduced in dozens of Russian regions, but still lacks a clear conceptualization. Moreover, the revival of interest in SEZ’s contrasts sharply with the recent moratorium on their creation. Such dramatic changes have underlying motives, the understanding of which is necessary to avoid a superficial view of investment attraction policies. Since they are currently of particular importance for ensuring macroeconomic stability, the purpose of the article is to identify the problems that may hinder the effective application of the SEZ regime in Russia. On this basis, the article systematizes the prerequisites for lifting the moratorium, establishes patterns and explains trends in the creation of SEZ’s, as well as gives proposals for the development of the concept of economic zoning.
Keywords: investment, investment climate, SEZ, preferential tax treatment, special economic zone, region, tax policy, tax regime
JEL: E62, L52, R11
Funding: The article was written on the basis of the RANEPA state assignment research program.
For citation: Gromov V.V. (2024). Establishment of Special Economic Zones after the Moratorium: Motives, Trends, Patterns. Financial Journal, 16 (5), 60–77 (in Russ.). https://doi.org/10.31107/2075-1990-2024-5-60-77.
© Gromov V.V., 2024
E.N. Timushev
Distribution of Federal Equalization Grants: Assessing the Impact of Major Changes, p. 78-96
Abstract
The purpose of the work is to establish how the main changes in the methodology of distribution of grants from the federal budget for fiscal capacity equalization affected the budget revenues of the constituent entities of the Russian Federation. The relevance of the study is due to the fact that the way of distribution of non-earmarked interbudget transfers affects the effectiveness of the model of interbudget relations. The modeling of the values of the transfers allocated annually to each constituent entity of the Russian Federation has been performed, demonstrating the adequacy of the developed methodology. The consequences of all major changes in the methodology of allocation of subsidies, such as introduction of restrictions on the reduction and increase of transfers, launching the mechanism of the model budget, reducing the equalization criterion and adding the coefficient of the level of social burden to the index of budget expenditures, have been calculated. It was found that the changes in the distribution methodology were progressive, that is, the higher was the fiscal capacity before the distribution, the smaller was the annual increase in equalization grants as a result of the changes. In other words, over time, more and more funds were allocated to the least prosperous regions. The regions of the North Caucasus Federal District benefited the most from the changes, and in general, all the innovations, except for restrictions on the reduction and increase in subsidies, had approximately the same spatial effect in terms of the composition of the “winning” regions. At the same time, it is more difficult to draw conclusions about the “losing” regions, since they have different levels of fiscal capacity.
Keywords: equalizing transfers, model budget, equalization criterion, interbudget transfers, budget expenditure index
JEL: H77
Funding: The manuscript is based on the results of research carried out within the framework of the state assignment of RANEPA.
For citation: Timushev E.N. (2024). Distribution of Federal Equalization Grants: Assessing the Impact of Major Changes. Financial Journal, 16 (5), 78–96 (in Russ.). https://doi.org/10.31107/2075-1990-2024-5-78-96.
© Timushev E.N., 2024
A.L. Osmolovskaya-Suslina, S.R. Borisova
Simplified Taxation System: First Estimates of 2024 Changes in Tax Legislation, p. 97-108
Abstract
Changes to the simplified taxation system (STS) introduced in the course of the tax system fine-tuning will significantly alter its design: income limit requirements will be expanded and STS payers will be recognized as VAT payers. The objective of this study is to find out what percentage of STS and CIT payers will be affected by these changes. For this purpose, a distribution of STS and CIT payers by income level was plotted. Information from tax forms of the Russian Federal Tax Service, Registers of SMEs and the SPARK database for the period 2019–2022 was used as input data. It was found that there is a shift in the structure of both STS and CIT taxpayers towards lower incomes: about 70% of CIT payers and about 90% of STS payers earn less than RUB 60 million per year. The analysis revealed that for 85% of STS payers the reform will be neutral, while for 9% the situation will slightly worsen. The winners of the reform will be those companies that will switch from CIT to STS. This transition will be formally available for 87% of CIT payers, and most of them will switch due to the possibility to pay VAT. Expansion of income limits under STS may become a decisive factor for only 10% of CIT payers.
Keywords: SME, simplified tax system, CIT, tax reform, taxpayers
JEL: H2, H71, K34
For citation: Osmolovskaya-Suslina A.L., Borisova S.B. (2024). Simplified Taxation System: First Estimates of 2024 Changes in Tax Legislation. Financial Journal, 16 (5), 97–108 (in Russ.). https://doi.org/10.31107/2075-1990-2024-5-97-108.
© Osmolovskaya-Suslina A.L., Borisova S.B., 2024
V.V. Klimanov, A.A. Mikhaylova
Improving Russia’s Tax System in 2024: Сross-country Comparisons and Regional Projection, p. 109-120
Abstract
The article discusses the additional adjustment of the tax system carried out in the Russian Federation in 2024, primarily in terms of changes in the rates of corporate income tax and personal income tax. Based on the analysis, a conclusion is made about the comparability of the levels of these taxes in Russia and in some countries of the Organization for Economic Cooperation and Development. It is shown that the centralization of additional revenues arising from the ongoing improvement of the tax system is more effective than the potential redistribution of these revenues to regional budgets due to the high concentration of corporate income tax and personal income tax in the wealthiest regions of Russia.
Keywords: tax policy, progressive taxation, personal income tax
JEL: H21, H71, H87
Funding: The manuscript is based on the results of the research carried out within the framework of the RANEPA state assignment.
For citation: Klimanov V.V., Mikhaylova A.A. (2024). Improving Russia’s Tax System in 2024: Сrosscountry Comparisons and Regional Projection. Financial Journal, 16 (5), 109–120 (in Russ.). https://doi.org/10.31107/2075-1990-2024-5-109-120.
© Klimanov V.V., Mikhaylova A.A., 2024
D.Yu. Fedotov
Taxes and Customs Duties as Instruments of Oil Rent Withdrawal to the Russian Budget Revenue, p. 121-139
Abstract
For countries focused on the extraction and processing of natural resources, including Russia, the crucial task is to ensure the rational extraction and distribution of natural rent. The tax model applied to natural rent should facilitate its optimal allocation to the budget without undermining the motivation of resource users to invest. The purpose of this study is to gauge the extent of oil rent extraction to the Russian budget and to propose strategies to improve the efficiency of oil rent redistribution to the state budget. According to the author’s hypothesis, export customs duties, compared to the mineral extraction tax, are more effective in achieving the desired redistribution of funds from resource users to the budget. The analysis shows that from 2005 to 2022 up to 87% of the oil rent received in Russia was extracted through rent payments to the state budget. However, in recent years the degree of oil rent extraction has decreased to 56%. This decline can be attributed to the tax maneuver initiated in Russia since 2015, entailing the reduction and eventual abolition of export customs duties and an increase in the mineral extraction tax rate. The results obtained indicate a decline in effectiveness of rent-based taxation in Russia due to the decreasing fiscal significance of rent payments. Furthermore, their regulatory function, designed to stimulate taxpayers to make investments, has weakened. These findings provide valuable insights for shaping fiscal policies and lay the foundation for further research in this area.
Keywords: tax, oil rent, customs duty, mineral extraction tax, tax maneuver, investment, correlation analysis
JEL: E62, H21
Funding: The article is based on the results of research carried out at the expense of budgetary funds under the state assignment of the Financial University under the Government of the Russian Federation.
For citation: Fedotov D.Yu. (2024). Taxes and Customs Duties as Instruments of Oil Rent Withdrawal to the Russian Budget Revenue. Financial Journal, 16 (5), 121–139 (in Russ.). https://doi.org/10.31107/2075-1990-2024-5-121-139.
© Fedotov D.Yu, 2024