Finance and Credit
 

Collision of theories of budgetary subsidies, fee-based public services and fiscal monopoly: Evidence from the Moscow Metro and best practices

Vol. 22, Iss. 14, APRIL 2016

Received: 20 January 2016

Accepted: 9 February 2016

Available online: 15 April 2016

Subject Heading: BUDGET REGULATION

JEL Classification: H12, H21, H23, H44, H53

Pages: 2-24

Anureev S.V. Plekhanov Russian University of Economics, Moscow, Russian Federation anureev@bk.ru

Subject The article analyzes various ways to finance the Moscow Metro.
Objectives The aim is to search for additional financial sources under reduction in budgetary revenues and the need to continue building new stations and lines.
Methods The key analysis of the methodology is an analysis of best practices in the context of various theories as alternatives to taxation and budgetary subsidies.
Results The paper considers major concepts of the Moscow Metro financing, i.e. budgetary subsidies by means of taxes; fee-based public services, user charges and cost allocation to end-users; fiscal monopoly; and additional budgetary revenue generation. I analyze other concepts, like low fares as a social benefit, prohibitive tariffs to prevent excessive migration of unskilled laborers, public transport privatization, and premium charges for the benefit of private investors. The analysis unveiled that 3/4 of real transportation costs the Moscow Metro covers from the city budget.
Conclusions Budgetary subsidies result in increased taxation of skilled labor and growing migration of low paid employees. This impairs the structure of the city economy, and adversely affects industries producing high-added value product. Low rates falsify budgetary social support, as mainly shadow economy employees and labor migrants benefit from them. The Moscow Metro is a classical fiscal monopoly; tariffs should be increased only on a case-by-case basis and only for the metro.

Keywords: public finance, public transport tariff, user charges, migration, fiscal monopoly

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