Financial Journal

p. 8-24

Authors: Olga V. Bogacheva, Oleg V. Smorodinov

At present, the methodology of technology readiness levels (TRL) is used worldwide by both public organizations and private companies to address a number of issues. In the system of public support for the development of the science, technology and innovation (STI) sector, TRL is increasingly used as a tool for R&D project management and funding. At the same time, the TRL methodology is not integrated into the budget process in any country in the world, which does not allow the full potential of TRL to be actualized. For Russia, where the role of state scientific and research organizations and public funding of STI is extremely important, this task is a real challenge. As the authors conclude, not only should the TRL methodology be adapted to the tasks of managing budget expenditures for R&D, but the public funding system with its financial instruments should also be adjusted taking into account the requirements of TRL. The key direction of integrating the TRL methodology into the budgetary process is linking of TRLs with elements of types of budgetary expenditures. This task could be accomplished after having taken the following measures: improvement of the budget classification in terms of R&D expenditures; application of a unified project approach to all instruments of state financial support and a unified classification of R&D projects; provision of a unified system for recording expenditures on science; improvement of public support instruments; and determination of the required ratio of R&D funding from budgetary and extrabudgetary sources for various TRL intervals. This work should include development and implementation of a new approach to understanding the boundaries of the STI sector, stages (types) of scientific activities, planning methods and conditions for the provision of public support, as well as improvements in the conceptual apparatus and tools of the support.

p. 54-80

Authors: Aleksandra L. Osmolovskaya-Suslina, Sofiia R. Borisova, Victoria A. Moskvina

Budget mobilization and improvements in the quality of tax administration are always among the top priorities for fiscal authorities. During periods of instability the role of tax compliance and budget execution increases even more. Times like these require quick analysis and adaptation of the tax system to changing economic conditions, and do not always allow conventional scientific approaches to be used in the analysis of tax collection. Fiscal authorities are faced with the need to create relatively simple tools for assessing that would allow one to analyze revenues with a minimum set of data and to assess the efficiency of the tax authorities taking into account changes in the macroeconomic environment. The integral index of collection presented in this work can help solve this problem. The essence of the approach is to analyze the coherence of two dynamics: actual tax receipts and their proxy tax base. The methodical advantages of the proposed indicator are its relative simplicity and versatility. It is applicable for most of the tax and non-tax payments and can be used both independently and in conjunction with other indicators of tax collection completeness. The above makes the index a convenient tool for quick analysis at different stages of the budget process—it can be useful not only for ex-post understanding of trends in budget revenues execution and tax administration dynamics, but also for improving the accuracy of budget forecasts ex-ante.

p. 98-116

Authors: Аnna A. Mikhaylova, Evgeny N. Timushev

The paper analyzes the concept and indicator of vertical fiscal imbalance (VFI) and its capability in assessing the creditworthiness (debt sustainability) of Russian regions. It is found that VFI does not replace other indicators of debt and broader fiscal sustainability, but complements them by providing diagnostics of the balance of incoming and outgoing intergovernmental transfers in addition to the balance of expenditures and revenues (budget deficit). Vertical fiscal imbalance has a close inverse pair correlation with the share of own (tax and non-tax) revenues and fiscal capacity, and can therefore reflect creditworthiness (along with the amount of debt and capital expenditures). Technically, it is advisable to carry out an analysis using VFI with a recalculation accounting for subventions. It is concluded that vertical fiscal imbalance is an important element of the methodology of diagnosing fiscal sustainability. Further study of features of the concept, as well as the use of VFI in the analysis and regulation of intergovernmental relations, suggests a promising outlook.

p. 11-28

Authors: Igor A. Yakovlev, Lyudmila S. Kabir, Svetlana I. Nikulina

The relevance of the research topic is determined by the need to respond to increased climate risks, which makes countries develop climate policies that can effectively meet sustainable development challenges and protect national economic interests. The transformation of climate policy causes the need to shift capital flows from “brown” economy sectors to “green” ones and integrate environmental factors into the process of making financial and investment decisions. At present, the EU is actively developing a climate finance system which will have an impact on the Russian economy. The article is aimed at outlining the changes in climate policies and financial strategies in the EU and Russia, influenced by the global climate agenda. It analyses the volumes and sources of climate finance mobilized by the EU, as well as regional support instruments in the transition period. The article determines the current changes in the Russian Federation’s climate policy. As a result of the research, the authors have come to the following conclusions. The EU is a vivid example of the fact that countries have long moved from climate change debates to the implementation of specific measures. The Russian Federation lags far behind the EU in terms of both mobilizing financial resources to ensure the transition to a low-carbon economy, and developing proven emission control instruments which help to stimulate the reduction of greenhouse gas emissions and fulfill the obligations under the Paris Agreement.

p. 44-50

Authors: Fu Zhihua, Cheng Yu

Green growth is not only an important way to build ecological civilization and promote economic transformation, but also the core essence of ensuring high-quality economic development in the new development stage. Optimization of tax system design is a key measure to release institutional dividend to promote green development. From the perspective of tax reform, this paper analyzes the current situation and the challenges of tax greening in China in recent years, and puts forward general thoughts and suggestions on how to promote green development at the new stage so as to create a two-wheel drive mechanism of carbon tax and environmental protection tax, lead the structural reform of China’s tax system, continuously improve tax regulation, and construct a green tax system with multiple taxes and means to cooperate with each other and to regulate it comprehensively and effectively.

p. 62-78

Authors: Rinat I. Rezvanov

The article examines the debt instruments of responsible financing, presented in world practice mainly in the form of green bonds, following the common principles of the International Capital Market Association (ICMA). A brief description of each bond issue model is provided: green bonds, social bonds, sustainability bonds, sustainability-linked bonds, and climate transition bonds. For each of the models for issuing responsible bonds, issuing companies are given as examples, with a brief description of the corresponding target parameters. The article focuses on the special measures of federal monetary support to Russian regions introduced in 2021. Based on the adopted comparative typological research method, these measures are analyzed from the standpoint of correlation with the established principles of sustainable financing and accepted widespread (general) international practice. Moreover, attention is paid both to interbudgetaryfinancial instruments presented in the form of infrastructure loans and new infrastructure projects for the purposes of regional economic development, and to the forthcoming issue of infrastructure bonds by Russian financial development institutions (in particular, Dom.RF). It is emphasized that the states themselves, and not only the corporate sector, are becoming active participants in the markets for sustainable financing, realizing the goals of long-term infrastructure development and the implementation of regional economic policies combined with a sectoral approach based on the principles of green economy (exemplified by Germany). A conclusion is made about the possibility of implementing new federal instruments of regional economic support in the system of target principles of sustainable development (ESG criteria). To achieve such a result, a qualitatively deep structuring of the proposed Russian financial instruments for infrastructure development will be required. Above all, this relates to the inclusion in the responsible debt policy instrument methodology of such four core components of the ICMA’s green bond principles (GBP) as the Use of Proceeds (1), Process for Project Evaluation and Selection (2), Management of Proceeds (3), and Reporting (4).

p. 93-107

Authors: Victoria I. Bushukina

The purpose of the article is to study the theoretical and practical aspects of investment activities in the field of renewable energy in the world and in Russia. To achieve this goal, during the development of theoretical material, a systematic analysis of existing approaches to the assessment of financing mechanisms for renewable energy projects was carried out. Statistical and econometric research tools include correlation analysis and multivariate regression analysis. The article examines the development of renewable energy, its benefits, and investments in the industry. The financial risks and barriers associated with financing renewable energy projects are considered. The development of the industry over the past 10 years is analyzed, taking into account the impact of the COVID-19 pandemic on the electricity industry in general and on renewable energy in a number of countries. It is established that the world is shifting to the use of renewable energy sources, and in Russia they are not being given due attention. It is revealed that the existing thermal generation units in Russia are of great age and are to be decommissioned in the near future. The current state of renewable energy in Russia, measures to support it and the rate of its development are investigated. The technical potential of wind and solar power plants in the Russian Federation is considered within the aim of diversifying electricity production. The factors that negatively affect the development of the renewable energy industry are identified.

p. 125-138

Authors: Natalia S. Matveeva

The article analyzes the experience of legislative regulation of financial statement preparation by micro entities in the Commonwealth of Independent States, the European Union, and the United Kingdom. The legislative acts of the countries, national accounting standards and financial reporting standards serve as the methodological basis for the analysis. For the purpose of this study the article identifies the criteria for categorizing an organization as a micro entity, analyzes the documents regulating the procedure for the preparation of financial statements, and compares the procedures for financial reports formation by micro entities in different countries. Micro entities are an important component of the country’s economy, affecting the level of employment, gross domestic product and other important indicators of the country’s development. In Russia, micro entities account for 96 percent of the small and medium-sized business sector, whose share in the gross domestic product was about 20.6 % in 2019 according to Federal State Statistics Service estimates and which created about 33 % of jobs. For comparison, in the OECD countries small and medium-sized businesses generate, on average, about 55 % of GDP and about 59.1 % of jobs, whereas in the EU countries the percentage is higher: 57.5 % of GDP, and 65 % of the employed. However, in order to support the development of micro entities, it is necessary to create favorable conditions for the implementation of entrepreneurial activities, in particular through simplifying the procedure for the formation and submission of financial statements.

p. 8-23

Authors: Ivan N. Timofeev

The article deals with the Russian experience of countering foreign economic sanctions. It makes a special stress on the legislative and institutional perspectives of the Russian practice. The key point implies that, despite significant innovations, Russian institutional design of counter-sanctions policy still suffers from a number of shortcomings. A tentative list includes a lack of coherence of key concepts, unsophisticated distribution of power among different governmental agencies, legal gaps in terms of civil and criminal liability for violation of the Russian counter-sanctions legislation etc. The article provides insights into key Russian legal documents as well as the practice of their implementation. Besides that, the research aims at filling the gap in sanctions literature, related to the disbalance between studies of initiators’ policies and targets of sanctions: research on the policy of initiator states prevail over that on the target states. Inquiry into the Russian practice may contribute to the studies of target states’ policies under sanctions.

p. 39-51

Authors: Yulia S. Timofeeva

Sanctions constitute one of the most demanded instruments of the U.S. foreign policy agencies in affecting foreign adversaries. The use of sanctions is also a challenge for commercial companies, given the growing use of financial sanctions and enforcement measures by the U.S. government. Banks have been increasingly vulnerable to these risks; they are among the most frequent targets of restrictive and enforcement measures by the U.S. and tend to pay much more in comparison with other sectors in terms of financial penalties. This study is based on the analysis of 54 cases of US financial penalties against banks as well as individual cases of US sectoral and blocking sanctions. The article aims at understanding the reasons why this type of financial organizations is vulnerable to US sanctions, the key features of US sanctions against them, and possible application of US sanctions in this direction in the future. The results of the study demonstrate that the heightened sanctions risks that banks face are attributed to their functional connections with the governments under sanctions, the nature of banking business and some intraorganizational factors. Moreover, the inclination of financial companies pressured by sanctions to accept requirements of the U.S. indicates the effectiveness of application of sanctions against commercial ventures.

p. 67-74

Authors: Viktor S. Utkin, Yury V. Kuznetsov

Economic sanctions, including financial ones, will be increasingly used in the practice of international relations in the foreseeable future as an instrument of pressure of some states or interstate associations on others. This creates incentives for the search and implementation of financial innovations aimed at reducing sanctions risks for businesses. The article demonstrates that the impetus for the creation of some important modern financial instruments and infrastructures was the attempts of states to legislatively or administratively regulate the market. The case of sanctions is likely to be no exception. One of the possible models for minimizing sanctions pressure on businesses can be the legal form of a protected cell company. It have been a financial innovation that originally emerged in the captive insurance industry and its objective was, among other things, to reduce the regulatory burden. Structures similar to protected cellular companies can potentially create the possibility to make the operations of national businesses of target countries opaque for external actors (financial regulators and monitoring agencies) that enforce sanctions. In the same time this model preserves the control of the target country’s own jurisdiction and transparency of business for its regulators. In essence, it creates a kind quasi-offshore legal regime, which, unlike traditional internal offshore zones, is designed to mitigate not internal, but external regulatory pressure.

p. 91-109

Authors: Alfiya F. Vasilyeva

This paper is devoted to developing an optimal model for assessing the default requirement (EAD) of assets over the entire life of a financial instrument in accordance with the requirements of IFRS 9 “Financial instruments”. The EAD for the whole life of a financial instrument is a set of estimates of EAD values from the first to the last year during the life of the asset. Two models are used for evaluating EAD under agreements with a set limit (for example, a credit line, overdraft) and under guarantees and letters of credit: the EAD model for balance sheet financial instruments (applied to the balance sheet part) and the credit conversion factor (CCF) model (applied to the off-balance sheet part). The approach to CCF modeling is described in the second part of the study. This model was developed based on a real bank portfolio of assets, using data which were collected at the beginning of the 2017. These days the topic of the paper is highly acute for both commercial banks that has experienced the problem of improving credit risk assessment models due to the requirements that have appeared to them owing to the introduction of IFRS 9 since January 1, 2018, and regulatory authorities as well, etc.

p. 122-138

Authors: Yuriy V. Belousov, Olga I. Timofeeva

Budget transparency is an effective tool in improving the quality of public budget executions. Ranking countries, regions and municipalities based on budget transparency is of interest for scientists and professionals in the whole world, including Russia. Methodologies behind budget transparency are a rather complex tool, the quality of which largely affects the results. This paper analyzes the available and applied ranking methodologies — in particular, the Open Budget Index (OBI) by the International Budget Partnership (IBP), transparency indices of local budgets in Kazakhstan and Croatia, and the ranking of the Russian Federation’s constituent territories by the level of budget data openness. During the analysis we identified the methodological principles of each of the considered approaches, their differences and similarities. Special attention was paid to problematic issues of the International Budget Partnership’s methodology. It is especially important to specify these problems, as the IBP methodology is a model in measuring the level of budget transparency. By using the ranking of Russian regions in terms of budget transparency levels, we demonstrate how to use special techniques and methods targeted at improving the quality of managing public fiscal performance.

p. 8-26

Authors: Victor L. Dostov, Pavel M. Shust, Pavel V. Pimenov

The current structure of the Russian payment market is almost ten years old—in the summer of 2011, the Federal Law “On the National Payment System” was adopted. This was the start of a “Russian noncash miracle,” a fantastic increase of non-cash payments in retail turnover. Having solved numerous problems, the new market structure today also needs to be updated. During this decade, the range of challenges faced by the industry and the regulator has changed significantly: those are unbalanced competition, the presence of types of companies with similar functionality on the market, complex licensing procedures, and so on. This article aims to consider a new perspective of market transformation based on the introduction of payment institution into the Russian system. The article analyzes the current and future types of payments; examines in detail the structure of the Russian payment market, its advantages and disadvantages; and describes the payment institution, identifying the risks and prospects of its introduction into Russian banking practice. The authors suggest the feasibility of introducing payment institutions as a more functional version of the payment agents operating in Russia to simplify the complex structure of payment service providers. Payment institutions should become conduits for new payment services (such as PISP and AISP). In addition, payment institutions should be supervised by the regulator. At the same time, the introduction of a new type of companies should not put existing players at a disadvantage. Therefore, existing credit institutions and payment agents should have the ability to easily change their status and transform into payment institutions and back again.

p. 38-53

Authors: Sergey V. Shkodinsky, Mihail N. Dudin, Daler I. Usmanov

The relevance of the topic of this scientific article lies in the need for a theoretical and practical study of the problem of escalating numbers and quality of cyber threats and attacks committed against institutions of the Russian financial system, implying their safe and sustainable development being ensured in Industry 4.0. The purpose of the article is a comprehensive analysis of cyberthreats facing the national financial system of the Russian Federation in the context of economy digitalization. The subject of scientific research is the processes of ensuring national security of the Russian Federation’s financial system in the digital economy. In the process of research, the authors relied on general scientific methods (observation, comparison, measurement, analysis and synthesis, as well as logical reasoning), specific scientific methods (static analysis, expert assessments, and graphical method), and the foresight method. The validity and reliability of the results of scientific research are ensured by the correctness and rigor of the logic and research scheme construction. Scientific and practical research of Russian and foreign scientists in the field of cybersecurity, digital economy and public administration was used as a methodological and fundamental basis of the study. Various approaches to key categories—digital sovereignty and cyberwar—have been systematized, and it has been established that the most pressing financial challenges and threats to the digital economy of the Russian Federation are as follows: hacker attacks, financial sabotage in the financial market, design and launch of social engineering trojans, infrastructure attacks on IoT (Internet of Things) networks, and sale of hacker tools with open source. The authors have analyzed the number and quality of cyberattacks on domestic financial institutions in 2016–2020; summarized the losses caused by cyberattacks to financial institutions; and identified the main scenarios for the development of cyberthreats and cyberattacks for the national financial system. As the main conclusion, the authors determine that further elaboration of the issues of ensuring financial institution cybersecurity in the digital economy requires justification and implementation of specific programs and activities carried out both by commercial banks within the framework of individual strategies for ensuring digital security, and by authorities and management with positions of ensuring the digital sovereignty of the state.

p. 67-75

Authors: Andrey I. Lukashov

Building upon the practices of the Treasury of Russia as well as other federal executive agencies, this article presents a new approach aimed at improving the efficiency of public administration through the centralization of general management functions within a given body. The set of general functions across public authorities is largely generic, suggesting that the stage involving the optimization of said functions can be regarded as a preliminary one preceding a full-fledged digital transformation of public administration. Functions associated with budget accounting and budget report formation, material and technical support, and personnel, legal and administrative activities dominate in the structure of both federal and local authorities’ general management functions. At the same time, individual government bodies at both the federal and regional levels are all, to some extent, engaged in the optimization of general functions implementation costs through assigning appropriate powers to subordinate agencies. Exemplified by the Treasury of Russia and other public administration bodies, the article systemizes and analyzes the existing approaches within the subject matter. As a result of the analysis, it is deemed advisable to synchronize the activities of public authorities, in particular through coordinating the process at the level of the Government of the Russian Federation.

p. 88-103

Authors: Olga A. Sinenko, Timofey P. Mitrofanov

The issue of “business fragmentation” has been relevant in Russia for over ten years. Business striving to ensure competitiveness makes it necessary to look for mechanisms to reduce the tax burden, applying special tax regimes or preferential tax conditions for residents of territories with special economic status. In this paper, the authors analyze the theoretical prerequisites for substantiating the signs of “business fragmentation,” and study the scope of application of “business fragmentation” schemes within the framework of preferential tax conditions for territories with special economic status in the Far East. The basic research methods were content analysis, comparative analysis and synthesis. As a result of the content analysis of judicial practice, the criteria for business fragmentation, confirming the formal division of a business, were substantiated. The authors carried out a comparative analysis of resident companies and identified, based on open data, 159 residents of priority social and economic development areas (PSEDAs) and 625 residents of the Free Port of Vladivostok (FPV) with signs of “business fragmentation.” Those amounted to 28.49 % and 29.48 % in the total number of active residents, respectively. Vladivostok is the leader in terms of the number of residents with signs of “business fragmentation,” with 443 residents of the FPV. The most common signs of “business fragmentation” among resident companies in territories with a special economic status of the Far East are substantiated: common persons managing companies, common or identical type of activity, and common address of location. Common types of activity among resident companies with signs of “business fragmentation” within territories with special economic status of the Far East are warehousing and auxiliary transport (15 % of PSEDA; 12.3 % of the FPV); construction of buildings (16.5 % of the FPV); and operations with real estate (14 % of the FPV).

p. 116-131

Authors: Vyacheslav Yu. Dodonov

Depreciation of the national currency — economies with predominantly raw material exports included — is reflected not only in the indicators of the external sector, but also in the sphere of public finance, in particular the formation of budget revenues. In Kazakhstan, the impact of devaluation on the formation of the state budget is specific, associated with the presence of a special source of its income in the form of transfers from the sovereign wealth fund (National Fund). During the period of low oil prices, revenues to the National Fund from the oil sector decreased, and its accelerated spending began, which brought to the forefront investment income as one of the main source of its receipts. The high investment income in the Kazakh currency secures relative stability of the fund’s volume and transfers to the budget, but this income is largely formed due to the exchange rate factor. The weakening of the Kazakhstani tenge against hard currencies placed as the main part of the fund’s assets ensures an increase in the tenge investment income through their revaluation. The growth of investment income, in turn, produces increased volumes of transfers to the budget. Thus, the devaluation of the tenge has become a factor of stability in the formation of state budget revenues.

p. 9-24

Authors: Vladimir V. Vagin, Ekaterina S. Shugrina

The purpose of the article is to substantiate the ecosystem approach as a basis for building a model of citizen participation in state and municipal governance, manifested in the laws of the Russian Federation, strategic planning documents, and other regulations, as well as in participatory practices of budget decisions. The ecosystem of citizen participation in governance is an urgent need for the modern stage of development of civil society and the entire complex of state–civil relations in Russia. The creation of such an ecosystem can increase the efficiency of state and municipal governance, include citizens and civil society institutions in the process of selecting priorities for the actions of public authorities, and reduce the protest potential caused by the lack of a comprehensive toolkit for citizen participation in governance. Among the first steps toward the formation of this ecosystem is the development of a federal law on public participation in governance. This law should become the basis for the inclusion in sectoral legislation of provisions governing relations between public authorities and citizens directly involved in decision-making on state and municipal governance issues. An important role in the deployment of the ecosystem is played by the development and implementation of a set of measures aimed at including the issues of citizen participation in the activities of state programs and national projects of the Russian Federation, implemented at all levels of public authority. The article also defines the basic principles of the development of the civic participation ecosystem.

p. 46-60

Authors: Tatiana I. Vinogradova

The paper investigates the participatory budgeting phenomenon in how it may accelerate many of the Sustainable Development Goals (SDGs) and support governments in reaching targets of the 2030 Agenda. The article analyzes the links between public participation in the budget process and sustainable development, illustrates the difference between participatory budgeting and other forms of public participation, and highlights the main effects of participatory budgeting. Results emerged from the analysis are that participatory budgeting as an adaptive mechanism can be integrated into the national objectives for the localization of the 2030 Agenda; that as a small-scale tool it can become a mechanism for testing numerous innovative approaches to public services provision; and that the “sustainable community creation” effect is the most important contribution to the Sustainable Development Goals.

p. 70-82

Authors: Elena M. Mrachek, Irina V. Valyushitskaya

Over the past decade, the practice of participatory budgeting has been getting increasingly widespread in Russian regions, its implementation taking place through a variety of methods. Using the Project Center of the Krasnoyarsk Territory as an example, the article examines the experience of information, methodological and educational support of the Program to Support Local Initiatives. The authors describe the structure and development of the integrated support system as well as the approaches to the implementation of educational support, highlight the specific features of information and methodological support for program participants, and summarize the results of the implementation of the regional Program to Support Local Initiatives.

p. 93-113

Authors: Mikhail V. Milchakov

Due to historical features and the heterogeneity of the economic landscape, the regions of Russia are characterized by significant disparities in the level of socioeconomic development. In order to manage regional development, a number of important strategic documents have been adopted, including the Spatial Development Strategy. The tasks of supporting problem regions and developing the largest agglomerations are articulated in these documents. In the context of the pandemic, new challenges have emerged related to slowing economic growth and budget constraints. The article examines the specifics of the formation of individual programs for the socioeconomic development of problem regions, as well as the situation of cities with more than 1 million inhabitants during the pandemic. The author presents proposals for improving the measures included in the Spatial Development Strategy.