Fiscal Federalism in the Background of Modified Budget Policy and Economic Restructuring

The decline in research interest in fiscal federalism in recent years may be due to a shift in the focus of economic policy, as the issue of financing public services has taken precedence over the distribution of tax powers. The emerging trend towards centralization is observed in all key areas of intergovernmental relations: the distribution of tax powers and the generation of tax revenues, the formation of regional development priorities, and the management of sub-federal and municipal debt. In the tax sphere, this is expressed in the hidden or explicit redistribution of revenues in favor of the federal center and in the strengthening of the regions’ focus on federal priorities. Federal objectives begin to prevail over regional objectives in the tax policy of the subjects of the Russian Federation. The reduction of non-targeted transfers and the increase of subsidies, including those linked to the implementation of national projects and federal programs, are aimed at achieving federal objectives. This increases the dependence of regional policy on federal decisions. The procedure for forming and servicing the state debt of the subjects of the Russian Federation has a similar effect. The increasing centralization of decision-making on the production and financing of public goods raises questions about the potential loss of public welfare and the effectiveness of their provision in the current model of intergovernmental relations.