Budget federalism is a system that implies the autonomous functioning of budgets (located at the same levels) at all stages of the budget process. It is based on certain principles, among which are:
1. The independent position of budgets at various levels. This means that each of them has the right to power and manage their own source of income. In addition, this provision implies the possibility of independent use of these sources.
2. Correspondence of financial resources that the authorities have to the functions performed.
3. The right to compensate for the costs that were required by decisions adopted by higher governing bodies and authorities.
4. The differentiation of budgetary responsibility and authority on expenditures at the legislative level, which is made between all authorities.
Budget federalism in Russia, due to the fact that the country occupies a vast territory, and also differs in some historical and national features of the development of individual regions, requires the improvement of its model.
As for the model itself, we note that its ideal form, which would be suitable for all federations, simply does not exist. The thing is that the development of each country is influenced by historical, economic, national and political factors.
However, the definition of an ideal model of fiscal federalism still exists. It lies in the fact that the volume of revenue powers possessed by the subjects of the federation should be equal to responsibility for the costs that are assigned to a certain level of power. However, if we consider the practical implementation of these requirements, it becomes obvious that there is always a significant gap between them, which is covered by the revenue sources existing at the disposal of the budget, which is at a higher level.
Budget federalism can exist productively when legislative distribution of powers is implemented efficiently, which is possible provided that three aspects are consistent:
1. The separation of revenue powers.
2. Differentiation of expenditure powers.
3. Aligning budgets.
The budget system can be horizontally or vertically balanced. The second principle is feasible when the amount of revenue is enough to fulfill the basic functions of the budget. That is, there is a concept of equality between expenditure and revenue powers. One of the important conditions of a vertically balanced system is a clear distribution of responsibilities between authorities.
As for the horizontal, it is characterized by a general correspondence of expenditure and revenue.
Budget federalism has two main models of existence:
1. Decentralized. It is characterized by the fact that regional authorities have a high level of financial independence, each level of the budget system is responsible for certain taxes, the central government does not exercise control over regional authorities. This model is also characterized by weak development of the budget equalization system and the removal of responsibility from the central ruling elite for the debts of regional governments and the deficit of their budgets.
2. The cooperative model, which is common in the economy of many European countries. It is distinguished by the participation of regional authorities in the redistribution of national income, the presence of taxes and revenues at each level of the budget system and the developed mechanism for the redistribution of finances between these levels, which is carried out through subsidies, subsidies and subventions. This model is applicable in those states where there are certain differences between the levels of budgetary provision of the regions.