Methods to Increase the Fiscal Capacity of Russian Cities

A current study “Methods to increase the fiscal capacity of Russian cities” aims to develop recommendations for improving the fiscal capacity of Russian prefectural level cities (“gorodskie okruga”). To achieve this goal, the federal and regional budgetary legislation, research, and thesis papers were analyzed, current lapses and imperfections of the federal budgetary and tax policy, problems of fiscal capacity at the municipal level were identified. These findings made it possible to conclude that there is no common understanding of the nature of fiscal capacity, that is why various methods and approaches to fiscal capacity interpretation were observed, systematized and structured. At first, the system of indicators, developed to be used at the regional level, was adapted for usage at the municipal level. Secondly, to evaluate the fiscal capacity of Russian municipalities, indicators were calculated, and integrated assessment was carried out. Finally, clustering was conducted to unite municipalities into groups, identify common problems and possible solutions. As a result, methods to increase the fiscal capacity of Russian prefectural level cities were proposed. They include a stable increase in the minimum wage, modernization of methodology for assessing the fiscal capacity, new rating system, an approximation of real estate cadastral value to its market value and bringing non-tax revenues to a single model.