Digest Finance

An algorithm for differential allocation of the personal income tax among budgetary levels

Vol. 21, Iss. 4, DECEMBER 2016

PDF  Article PDF Version

Received: 1 October 2016

Received in revised form: 14 October 2016

Accepted: 3 November 2016

Available online: 20 December 2016


JEL Classification: G18, H22, H24, H61, H71, H77

Pages: 11-20

Yashina N.I. National Research Lobachevsky State University of Nizhny Novgorod, Nizhny Novgorod, Russian Federation

Ginzburg M.Yu. National Research Lobachevsky State University of Nizhny Novgorod, Nizhny Novgorod, Russian Federation

Chesnokova L.A. National Research Lobachevsky State University of Nizhny Novgorod, Nizhny Novgorod, Russian Federation

Importance The research focuses on personal income tax and analyzes whether it is possible to differentiate personal income tax between federal and regional budgets.
Objectives The research pursues creating a reasonable mechanism to reallocate taxes among levels of the budgetary system of the Russian Federation.
Methods Having analyzed scholarly literature, currently there is no mechanism to assess how taxes should be allocated, including personal income tax, among budgetary levels. Taxes are allocated on the basis of subjective estimates of policy makers in line with consumption requirements of areas. In this respect, we devised a specific mechanism to differentiating personal income tax revenue between regional and federal levels. We assessed theoretical criteria of tax allocation among budgetary levels and chose an integral indicator for homogeneity of time series (2010–2014) throughout 83 regions of the Russian Federations. Using the weight theory, we determined the percentage of personal income tax revenue remitted to regional and State budgets.
Results We designed an algorithm to differentiate personal income tax between regional and federal levels of budget. The algorithm is illustrated with the Nizhny Novgorod Oblast. The significance of the mechanism was verified by mathematical analysis, confirming the reasonableness of the proposed algorithm.
Conclusions and Relevance The results verify the hypothesis stating that personal income tax could be reallocated between federal and regional levels of the budget on the basis of the estimation mechanism that includes some division criteria. The findings can be used to form profitable parts of regional budgets.

Keywords: personal income tax, budget, variation coefficient, tax revenue, federalism


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