The key issue in budget planning is subsidies. The total sum of subsidies forms a considerable part of the outlays and is increased by their growth rates, which are higher than the rates of income growth. A general approach to the problem is: gradual saving of subsidies by transferring them to incomes of the population. Besides partial reduction of state outlays, this will allow expansion of the solvent demand, to keep up production output and, consequently, the income base of the budget. EVALUATION OF THE PERFORMANCE OF THE NIZHNI NOVGOROD OBLAST BUDGET

In recent years, budgets of the majority of republics of the Russian Federation and regions had a stable excess of revenues over expenditures. Subventionary territories were an exception, but the Nizhni Novgorod oblast is not included among them: the surplus balance of the regional budget in 1990 was 148 mln rubles, and in 1991, 608 mln rubles (11% of budget outlays). As a result of serious modifications of taxation policy, when passing the budget for the first quarter of 1992 a considerable deficit (17% in the expenditure part) was planned. There were serious reasons for this: responsibility for all social services and subsidies of essential consumer goods has passed from the federal government of Russia to the regions.

In the first quarter the excess of receipts over outlays was 25% of outlays, and in the second quarter, 15%. The total excess over half a year was more than 1,5 bln rubles. The success of the budget policy of the local government is evident.

TAXATION POLICY

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The vast majority of revenues were yielded by the 4 taxes contained in Table 1. In the first quarter a significant role (5% of revenues) was played by the use of remainders of budgetary funds according to the results of 1991. Over 50% of revenues are yielded by corporate income taxes, and one-fifth by individual income taxes. The considerable excess of their actual revenues in comparison with that which was planned is connected with higher growth rates of prices and incomes and the delay in re-appraisal of basic production assets (growth of revenues because of non-sufficient amortization, i.e., in actual fact productive assets are "eaten up").

At the same time, revenues from excise taxes and particularly those of VAT are less than the expected figures. Also, the amount of collected VAT planned by the regional finance department is less than the figures given by the Russian Federation Ministry of Finance.

Monthly tax revenues are highly irregular: their peak values fall on the beginning of a quarter (April, July)), while in May and June tax payments tend to decrease.

The potential of the local government to change the tax policy is limited by tax legislation and is therefore relatively small.

The following local taxes are imposed by district and city councils of the region.

1. Tax for the upkeep of the police department - in 25 districts and cities.

2. Car and computer resale tax - in 5 districts and cities.

3. Local auction and lottery charge - in 9 districts and cities.

4. Alcohol sales tax - in 13 districts and cities.

5. Apartment voucher charge - in 10.

6. Natural resources tax - in 3.

7. Stock exchange transaction charge, territory improvement charge and parking charge - in 1 or 2 districts and cities.

There are certain opportunities to expand local taxation, but they are insignificant. A sharp taxation increase imposed in early 1992, and continuing decline in output, make it impossible to levy new taxes or increase the tax rates now in force. Therefore it is advisable to impose a transportation tax recommended in Article 8 of the Russian Federation Law "On the Budget System of the Russian Federation in 1992" or to increase deductions to the Employment Fund, provided simultaneous decreases in deductions to the Pension Fund are made or other similar steps are taken.

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