Chief Challenge in Russia is to Ensure Citizens Can See Relationship of Taxes Paid and Results Achieved, Luzin Says

Paul Goble

            Staunton, March 3 – Debates about decentralization and federalism in Russia typically fail to recognize what is the country’s chief problem in that regard – the failure of citizens to see the cause-and-effect relationship between taxes paid and results achieved, the consequence of the hyper-centralization of taxation, Pavel Luzin says.

            Only if taxation powers areradically decentralized not just from Moscow to the regions and republics but from both to the municipalities is there any chance this can be overcome and the system become sufficiently flexible to deal with the enormous complexity of Russia and the changes now taking place, the Perm analyst argues (region.expert/which_federation/).

            But even if this decentralization of taxing powers occurs, there will continue to be flows of people out of some regions into other and therefore “contradictions, conflicts and disappointments” but at least, “almost all of them will have the chance for constructive economic and political action and there will be successes as well.”

            There is almost universal recognition that the existing system of regional administration and its relationship to the center “does not correspond to the interests of the majority of Russian citizens.” There is even a growing understanding that the current arrangements “do not correspond even to the interests of the Russian powers that be themselves.”

            The latter is happening because the center is constantly forced to intervene in regional affairs, balancing its own interests and those of others and thus forced to engage in “repressions against governors, mayors, and regional bureaucrats” rather than focusing on its proper functions of working for the country as a w hole.

            But despite this, Luzin says, there currently is no agreement on how to change the system. Some favor re-animating the existing the existing regions and republics, others call for making regions into republics and still others favor making major cities the basis of a new Russian federalism.

            But such discussions fail to address the key challenge which is to open the way for Russians to achieve their goals by changing the relationship between people who pay taxes and officials who spend them as close as possible, something that can be done only by decentralizing taxation powers.

            And these discussions also fail because they are top-down exercises which seeks to impose a common framework on a country that is far more diverse than most imagine and fail to recognize four major and continuing changes: ever greater movement of people from one place to another, rapid urbanization, a slowdown in population growth, and economic stagnation.

            They also fail, Luzin suggests, to cope with the problems arising from a situation in which “the natural and very powerful socio-economic inequality exists not only among regions but also within them,” with parts of the existing federal subjects experiencing a very different reality than other parts of the same subjects.

            According to the Perm political scientist, “Russia is objectively much more complex than it often seems” and thus requires far more diverse arrangements than the admittedly failed arrangements the Russian Federation inherited from Soviet times, one in which there is not a single region which can use its own tax and non-tax revenues to address this diversity.

            For the creation of genuine federalism, one would first need “strong regions which could create the federation  anew, but they simply don’t exist and won’t … And thus for the equalization of a union of regions in Russia, there is no basic” at least not given the current taxation arrangements and the related demographic and economic trends.  

            What all this means, Luzin continues, is that “local self-administration must be primary, and the regional superstructure must occupy itself with general technical and social infrastructure from roads to cancer centers and for example, airplanes for fighting major fires” and not with everything as now.

            In such a system, he says, “consolidated regional budgets will not become bigger, but there will occur a redistribution of responsibility” for action toward one in which local administration will become closer to the people, be seen to be dependent on them, and be capable of reacting adequately to existing circumstances and changes.

            This will mean not only that the federal bureaucracy will become smaller but also that regional ones will while local officialdom will grow, ending a situation in which “the number of federal bureaucrats exceeds the number of regional and municipal employees taken together,” a pattern that has become worse in recent years.

            The demands of those who want to make Russia better should not focus on giving the regions more money but eliminating the regulation of business and allowing it and the citizenry to make choices and control what the state does by concentrating power at the lowest level possible.

            In short, Luzin concludes, Russian regionalists and federalists must ask the question in the right way and talk about the necessary decentralization of Russia to one in which “not officials but citizens and local residents” will make decisions. That won’t be easy, and there will be many mistakes, but it promises a better outcome than redrawing maps.