Budget federalism and its basic models

Budget federalism is a system that implies the autonomous functioning of budgets (at the same levels) at all stages of the budgetary process. It is based on certain principles, among which there are:

1. Independence of budgets of different levels. This means that each of them has the right of power and management of its own source of income. In addition, this situation implies the possibility of independent use of these sources.

2. Correspondence of financial resources, which have authorities, to the functions performed.

3. The right to compensate for the costs required by decisions made by higher authorities and authorities.

4. Delineation of budgetary responsibility and authority for expenditure at the legislative level, which is performed between all authorities.

Budget federalism in Russia due to the fact that the country occupies a huge territory, and also differs in some historical and national features of the development of individual regions, requires the improvement of its model.

As for the model itself, we will note that its ideal form, which would be suitable for all federations, simply does not exist. The whole point is that the development of each country is influenced by historical, economic, national and political factors.

However, the definition of an ideal model of fiscal federalism still exists. It consists in the fact that the volume of revenue powers that the subjects of the federation possess must be equal to the responsibility for expenses that are assigned to a certain level of power. However, if we consider the practical implementation of these requirements, it becomes obvious that there is always a significant gap between them, which is covered by revenue sources existing at the disposal of the budget at a higher level.

Budget federalism can be productive when the legislative allocations of powers are executed effectively, which is possible provided that three aspects are met:

1. Separation of revenue authority.

2. Delineation of expenditure powers.

3. Alignment of budgets.

The budgetary system can be either horizontally or vertically balanced. The second principle will be implemented when the amount of revenues is sufficient to fulfill the basic functions of the budget. That is, there is the concept of equality between expenditure and revenue authorities. One of the important conditions for a vertically balanced system is a clear division of responsibilities between authorities.

As for the horizontal, it is characterized by a general conformity of the expenditure and income parts.

Budget federalism has two main models of existence:

1. Decentralized. It is characterized by the fact that regional authorities have a high level of financial independence, each level of the budget system is responsible for certain taxes, the central government does not exercise control over regional authorities. This model is also characterized by a weak development of the system of budgetary equalization and removal of responsibility from the central ruling elite for the debts of regional governments and the deficit of their budgets.

2. Cooperative model, which is common in the economy of many European countries. It is distinguished by the participation of regional authorities in the redistribution of national income, the existence of taxes and incomes at each level of the budgetary system and a developed mechanism for redistributing finance between these levels, which is implemented through subsidies, subsidies and subventions. This model is applicable in those states where there are certain differences between the levels of budget provision of the regions.