The largest regions have sharply increased their income amid sanctions

Leading regions of RUSSIA have increased their income in the first half of 2022, despite the sanctions, calculated in the NKR. Revenue growth was 27% compared to the same period in 2021. According to ACRA, the total surplus of the regions is now ₽1,

The top 10 Russian regions — leaders in terms of the absolute level of budget revenues — managed to significantly increase revenues in the first half of 2022 — by 27% year-on-year, from RUB 3.44 trillion to RUB 4.37 trillion, according to analysts from the National Credit Ratings rating agency. ”(NKR, part of the RBC group). During this period, these ten entities accounted for 47% of the total revenues of the consolidated budgets of Russian regions (that is, together with municipalities).

St. Petersburg (by 72%), the Yamalo-Nenets Autonomous Okrug (by 65%), and Yakutia (by 40%) increased the most. The smallest growth was demonstrated by receipts from the Krasnodar Territory and the Sverdlovsk Region - by 13%. In Moscow and the Moscow Region, revenues increased by 18% and 16%, respectively.

In general, the revenues of the consolidated budgets of 85 regions in the first half of the year were executed with a nominal growth of 24.8%, which is largely due to the post-COVID recovery of economic activity in the period up to the end of the first quarter and high oil prices , Alexander Proklov, Managing DIRECTOR of the NKR, explained to RBC .

If in the first quarter of 2022 the growth of the regions' own incomes (that is, excluding gratuitous transfers from the federal center) was 31%, then in the second quarter it slowed down to 19% compared to the same period of the previous year, follows from the data of the Russian Ministry of Finance.

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The top 10 largest regions include Moscow, St. Petersburg, the Moscow and Sverdlovsk regions, the republics of Tatarstan and Yakutia, the Krasnoyarsk and Krasnodar regions, the Yamalo-Nenets and Khanty-Mansi Autonomous Okrugs. Basically, these are regions that are characterized by high budget independence. Only Yakutia falls out of this list somewhat, in whose income gratuitous transfers from the federal center play an important role.

The Federal Treasury, which used to publish detailed information on the execution of regional budgets on a monthly basis, has stopped disclosing these reports since March. But the regions still disclose this information on their own.

According to the latest data from another rating agency, ACRA, over the seven months of 2022, the largest increase in own (tax and non-tax) revenues was recorded in the Kemerovo Region and the Republic of Khakassia, more than doubling, which ACRA attributes to high coal prices. On average, in the regions, the growth in their own income in January-July compared to the same period last year amounted to about 25%, follows from ACRA data.

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What is the dynamics of income tax

The most noticeable contribution to revenue growth in the ten most profitable regions in the first half of the year was made by income tax, which showed a significant increase in several subjects - mainly due to rising prices for gas and partly for oil and coal, Proklov from the NKR noted. Thus, revenues from income tax in St. Petersburg almost tripled (by 189%), in the Yamalo-Nenets Autonomous Okrug and Yakutia - more than doubled, by 137 and 120%, respectively. In St. Petersburg, Gazprom and its oil structure Gazprom Neft are registered and pay regional taxes, the economies of the YaNAO and Yakutia are closely connected with the development of natural resources.

According to ACRA, the own revenues of the St. Petersburg consolidated budget for seven months grew by 61% compared to the same period a year earlier.

The average price of Russian Urals oil for seven months of 2022 increased by 29% compared to January-July 2021 and reached $83.3 per barrel, follows from the data of the Ministry of Finance. As for gas prices, the Federal Customs Service (FCS) suspended the publication of EXPORT data due to sanctions, including the average export prices for Russian pipeline gas. According to the International Monetary Fund, the world price index for natural gas (combines gas prices in Europe, Japan and North America) in June 2022 jumped 2.75 times compared to June of the previous year, and in July this index increased by another 38% .

In those entities that do not receive income tax from oil and gas and related trading companies, the growth rate of this tax in some cases is very modest, Proklov said. For example, the Sverdlovsk region shows an increase of only 8.3%, and the Krasnoyarsk Territory - by 1.2%. In general, in the regions of the top 10, the growth in income tax revenues reached 43%. However, in the part of the subjects that are not included in the top ten, revenues from it have already begun to decline.

“In some regions outside the top 10, income tax revenues are already declining. In particular, Belgorod (minus 10.5%) and Lipetsk (minus 19.3%) regions can be noted, in which the largest taxpayers are ferrous metallurgy and related mining enterprises, which are now going through hard times,” Proklov said. Earlier, RBC reported on the problems of the steel industry, which affected the decline in non-oil and gas revenues of the federal budget in July.

Indeed, lower income growth rates, and in some cases even their decline, are demonstrated by regions in which a significant share of the economy is formed by metallurgy, but this is more likely due to the high base of last year, confirms Maxim Pershin, Deputy Director of the ACRA Sovereign and Regional Ratings Group. “Sustaining high prices for most resources will remain an important support factor for the Russian regions. We can expect a certain decrease in tax revenues in regions with a high share of metallurgy in GRP, but most of these regions received record revenues last year and were able to create reserves that can be used this year,” he points out.

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How income from personal income tax has changed

A fairly noticeable increase in income from personal income tax is noteworthy, Proklov states. For six months, the volume of these deductions in the top 10 regions increased by 16%. The largest increase (by 19%) was recorded in Moscow, which is explained by an increase in wages over the past year, although fairly high inflation (15.5% in July compared to July last year) largely leveled this growth, he noted.

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“In the future, according to our estimates, one should hardly expect such an impressive increase in personal income tax against the background of the unfolding recession in the economy, which, according to the Central Bank, will last until the third quarter of 2023,” the expert added.

Revenues of regional budgets by the end of 2022 will remain at the level of 2021, but at the same time there will be a rapid increase in expenditures (by 7%, or 1.24 trillion rubles), follows from the RANEPA consensus forecast. According to experts, the greatest contribution to the deterioration of the situation will be made by a reduction in income tax revenues (a decline is expected in the amount of 12% by the end of 2022). At the same time, they predict a 4% increase in personal income tax due to the stable situation on the labor market.

RBC sent a request to the Ministry of Finance.