The Ministry of Finance proposed to change the distribution of income tax by region

The Ministry of Finance proposed to exclude the wage fund from the formula used to distribute the income tax of companies with branches by region. The measure can benefit regions where production is located,

The Ministry of Finance is preparing changes to the system of distribution of income tax by regions for companies with separate subdivisions (branches). This was reported to RBC in the press service of the department. The adjustments, according to the Ministry of Finance, will ensure a more equitable transfer of tax to the regional budgets.

How is income tax distributed today?

The general income tax rate is 20%: 3% is credited to the federal budget (they are paid by the parent organization), and 17% to the regional budget. These 17%, in turn, are distributed between the parent organization and branches in proportion to their shares of profits; each part is paid to the budget of the corresponding region at the location of the parent organization or separate subdivision. The share of profit is determined based on the weighted average number of employees or payroll fund (payroll) of the branch - at the choice of the taxpayer, as well as the residual value of depreciable property.

Under the current tax legislation, the amount of income tax is mainly paid to the budgets of those constituent entities of Russia where a greater number of jobs have been created and the main part of the production base is located, the Ministry of Finance explained. Therefore, the existing mechanism is economically justified. But the level of wages in the subjects can vary significantly.

“In this regard, the Ministry of Finance, for a fair distribution of income tax, proposes to distribute it based on the number of employees and the cost of fixed assets, excluding the possibility of using the wage fund indicator. Such changes are now being prepared in the ministry,” the ministry said.

The fact that the Ministry of Finance is preparing proposals for a more equitable transfer of tax on the profits of branches to regional budgets was said at the end of April by the head of the department, Anton Siluanov. “Where there is production and working hands, money must also remain,” he explained.

The Ministry of Finance also considered another principle of income tax distribution between regional divisions - based on the volume of products produced, the ministry said. However, in the end, this initiative was not supported: the indicator is not universal, not all separate divisions are directly involved in the production of products. In addition, the inclusion of this indicator in the calculation of the tax would complicate the administration and would lead to disputes with the tax authorities, the Ministry of Finance believes.

The issue of a fair distribution of income tax has become especially relevant in the context of the abolition of consolidated groups of taxpayers (this institution will be abolished from 2023), said Vladimir Klimanov, director of the RANEPA Center for Regional Policy. According to him, the authorities need to approve some new formula over the summer in order to be able to plan regional budgets in September.

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RBC sent a request to the Federal Tax Service.

The Accounts Chamber explained the reduction in income tax in rich regions Economics

Which regions collect the most income tax

According to the Federal Tax Service, in 2021, in the regional context, Moscow became the absolute leader in collecting corporate income tax (excluding consolidated groups of taxpayers). The budget of the capital received 977 billion rubles, which is more than 26% of the total income tax transferred to the Russian regions.

In second place was Krasnoyarsk Territory (116 billion rubles were collected there), and in third place was the Yamalo-Nenets Autonomous Okrug (99 billion rubles). The Kemerovo region (98 billion rubles), the Chelyabinsk region (96 billion rubles) and the Khanty-Mansi Autonomous Okrug (95 billion rubles) were also among the recipients of the largest tax revenues.

Some of these regions were also among the leaders in terms of the average salary of employees of organizations in 2021. For example, according to this indicator, Moscow finished the year in second place with an average salary of 172.5 thousand rubles, second only to the Chukotka Autonomous Okrug. The Yamalo-Nenets Autonomous Okrug took fourth place (137 thousand rubles), and the Khanty-Mansiysk Autonomous Okrug - seventh (120 thousand rubles).

At the same time, regions with the lowest income tax revenues are usually characterized by low average wages. For example, Ingushetia took the last place among all subjects both in terms of income tax collection (439 million rubles) and in terms of average wages (38.3 thousand rubles).

The payroll fund used in calculating the branch's profit share takes into account not only the amount of salary, but also the number of employees, Elena Anisimova, Senior Director, Head of the ACRA Sovereign and Regional Ratings Group, drew attention. Otherwise, the Magadan region, for example, would be in the lead with its high salaries, while the number of workers there is low (as, indeed, the population as a whole), she explained. The leadership of the Chelyabinsk and Kemerovo regions in the list of income tax recipients is a reflection of the high prices for metals and coal last year.

“It is impossible to estimate how many companies have separate divisions and how many of them use the payroll fund, and how many use headcount. However, the payroll for management personnel may turn out to be higher than the payroll at the place of production, so the proposal of the Ministry of Finance, obviously, can work,” Anisimova said.

Levon Hayrapetyan, head of the Tax Policy Department of the Center for Strategic Research, agrees with her. According to him, the current method of distribution can lead to significant disproportions in revenues in favor of the regions where management personnel work, and the planned changes will just allow redirecting taxes to production entities. It will be crucial to observe the dynamics of tax flows in practice in order to prevent distortions in the opposite direction, he warns.

It is expedient to correct the second component of the formula, namely the depreciation cost of the property, Anisimova suggests.

“A modern office building in the center of Moscow, where management staff can be located, can cost more than depreciated fixed assets at the place where the production is located. That is, in terms of the value of the property, the region where the office center is located also wins. At the same time, the market value of the means of production may well be higher than the depreciation value,” the expert concludes.

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