Contrasts in Budgetary Opportunities of City-Regions and City-Municipalities in Russia and the Experience of Germany

Abstract

This paper compares the experience of Russia and Germany in terms of the differentiation of cities of various status in the territorial system according to their powers and fiscal revenues. We analyze the data on the number and population sizes of urban districts (okrugs) in Russia and their analogues in Germany, as well as the data on the execution of budgets of city-municipalities and city-regions. It is shown that the system of territorial division in Russia at the municipal level differs from the German one by significantly greater fragmentation and the dominance of urban districts with a small population. In both countries, local budgets are aimed at solving social problems and developing local infrastructure, and their approaches to secure tax sources for local budgets are also similar. At the same time, the contrast between the fiscal indicators (revenues and expenditure per capita, the share of interbudgetary transfers in revenues) of city-regions and city-municipalities in Russia is much greater than in Germany, which limits the ability of the authorities in urban districts to pursue an independent economic policy, including support for the development of foreign economic relations. We suggest the directions for the growth of the revenue base of local budgets in Russia (the complete transfer of tax payments from small businesses to local budgets, improving the quality of accounting for land and real estate, and management of nontax revenues) and endowing different powers to local governments of urban districts with different population sizes.