Moscow Department of Finance has published preliminary data on budget execution in 2016. As compared to 2015, the revenues grew by 11% to 1.852 trillion rubles, expenses by 14% to 1.736 trillion. Revenues exceeded our expectations and budget planning (Moscow planned to receive 1.666 billion rubles.), expressed her surprise S & P analyst Ekaterina Ermolenko.
Ermolenko explains this increase in revenue by growth of receipts from income tax to 572 billion rubles (18%). According to her, the increase in income tax was mainly due to the financial sector. According to the website of the Moscow government, in 2015 the financial sector contributed 68.75 billion rubles of the income tax, and in 2016 the figure reached 141.41 billion.
The Finance Department report said that the increase in revenues from the income tax is due to, among other factors, the reduction in returns on taxpayers' accounts and tests in other taxes compared to 2015; in addition to the finances, the income gains trade and manufacturing grew.
A person close to the City Hall explains that a significant part of the income tax was provided by Sberbank. It is the largest taxpayer in Moscow today, it gives about 20% of income tax. The sharp rise in revenues is also associated with low base of 2015, and in the last year Sberbank had more stable income, says the source of Vedomosti. Sberbank declined to comment.
Moscow revenues from parking fees on the public roads and off-street roads in 2016 increased by 25.6% to 4.37 billion rubles. Fines for traffic violations brought 13.144 billion rubles to the capital budget. In 2015, the proceeds of such fines amounted to 11.3 billion rubles (11.8% growth).
For the first time from the time when oil and gas consolidated group of taxpayers stopped to pay taxes in Moscow, income tax began to grow, says senior director of Fitch Ratings Vladimir Redkin.
Prior to that, according to Redkin, revenues from the profit tax did not exceed 485 billion rubles. Due to the new consolidated group of taxpayers (KGN), created in 2012, revenues from the profit tax oil and gas sector companies registered in Moscow, fell from 16 to 2%. In nominal terms, the capital annually loses about 170 billion rubles. It seems that now it was able to almost completely compensate for falling revenues. To do this, the city had to develop a lot of tools: both in terms of tax revenues and non-tax ones: income from advertising, the use of property, sale of patents for migrant workers, the introduction of trading fees, the introduction of paid parking.
Among fiscal measures are, for instance, the transition to levying property tax on the cadastral value. The net effect of tax projects in Moscow in 2015 amounted to more than 50 billion rubles, the former head of department of economic policy Maxim Reshetnikov told Vedomosti.
Moscow's main source of budget revenues is still the tax on personal income: 745.1 billion rubles (40.2%); its revenues increased by 7.7%. This is higher than the average growth rate and is associated with an increase in wages in the private sector, says Ermolenko.
The share of non-tax revenues declined slightly compared with the previous year: from 12 to 11.2%. In nominal terms, there's an increase of 8.5% (208.4 billion rubles). Gratuitous revenues amounted to 77.9 billion rubles (last year, 75.5 billion rubles).
The growth of expenses is associated with the low base effect in 2015, when spending fell (to the actual execution of the city budget in 2014) in nominal terms, says Ermolenko. Also, growth in 2016 is attributable to an increase of funding of targeted investment program: by 18% to 418.8 billion rubles.
The second largest item of expenditure of Moscow is social support of residents of the city, which cost 367.5 billion rubles. However, these expenses increased marginally: in 2015 344.5 billion rubles were spent on social purposes.
As a result, the budget was executed with a surplus of 116 billion rubles. Moscow itself planned a deficit of 170 billion rubles. Most of the surplus is used to repay the state debt of the city, said the Department of Finance. During the 2016 Moscow debt decreased by 2.3 times and on 1 January 2017 amounted to 61.9 billion rubles.
"The Moscow ranking is at the level of the country and its own credit rating is higher. Moscow has a large margin of safety; moreover, Moscow, if it wishes, can always take a loan in the markets," says Red'kin. According to him, if the economy isn't in shocks, the city's budget will continue to be in surplus, and Moscow will not be able to spend all the money.
The Moscow authorities planned a record deficit of 218 billion rubles (11% of revenues) in the next year, as follows from the Moscow budget project for the coming three-year period. The deficit increased mainly due to increased capital expenditures: Moscow plans to invest in urban development; in 2017 investments will increase by more than 15% compared to 2016 and reach 484 billion rubles.
It is not excluded that Moscow overestimates the costs in order to protect the citizens' money: the federal center is seeking every opportunity to replenish the budget, said one of the City Hall consultants. Because of the rules to increase the share of federal income tax from 2 to 3 p.p. of 20% in order to redistribute this money to support poor regions, Moscow will lose about 28 billion rubles. The rate will be valid for three years. Moscow Mayor Sergey Sobyanin criticized it, calling it a political move on the principle of "take away and divide". "In comparison with 116 billion rubles of surplus money, 28 billion is non-critical," says Redkin.