Improvement of personal income tax formation and distribution process in the budget system of Russia (in the case study of municipal budgets)

Since 2012 municipal budget state has been characterized by negative trends: a reduction in budget revenues, their acute shortage to cover current expenditures, and an increase in debt burden. These trends are first of all caused by personal income tax re-distribution reform between budgets of different levels against cities. This fact stresses the importance to increase the municipal budget profit. Most scholars including those working in the Vologda Scientific Center of the Russian Academy of Sciences believe the urgent correction of the current tax system to be significantly important. In this regard, the purpose of the article is to determine the role of personal income tax in the formation of budgets of urban districts and to identify directions for improving the policy of the budget distribution in the budget system of Russia. The structure and conditions of the dynamics of taxable profit of municipal budgets of the North-West Federal District have been analyzed in details. The analysis has revealed a direct correlation between municipal budget state and the standard of personal income tax allocation. We have proved that the key reason for the deterioration of the budget system conditions is the reform of the mechanism of inter-budgetary tax redistribution. The ways to reform personal income budget distribution between budgets of different scales have been systematized and suggested on Russian and foreign researches basis. Governing bodies can make reasonable decisions on the Russian budget policy reformation on the research results basis to optimize tax capacity of urban district budgets. The obtained results will allow us to develop and substantiate specific scenarios for vertical and horizontal adjustment of the structure of local income, as well as to reveal the possible consequences of charging personal income tax not by the place of employment, but rather by the place of residence of a taxpayer.