Sector

Regions & Municipalities

Type

Analytical commentary

Sectoral analysis of corporate income tax revenues for 2022

Corporate income tax — the largest component of the tax and non-tax revenues of the budgets of most of Russia’s regions — is most often affected by market or larger changes, such as the transformation of trade chains against the backdrop of the geopolitical situation. The processes that took place in 2022 and are taking place this year are impacting the structure of corporate income tax and the dynamics of how it is received. At the same time, the analysis of the situation is complicated by the atypical base for comparison, as in 2021 many sectors experienced a considerable upturn after the unsuccessful pandemic year of 2020.1 

Financial sector. The leader in terms of the decline in income tax revenues among the main industries that make a significant contribution to the tax revenues of the regions was the financial sector. In 2022, proceeds from this sector declined by 40% year-on-year, which is due to losses incurred by banks (including due to the creation of reserves for credit losses). The main share of proceeds in the financial sector were generated in two federal cities — Moscow and Saint Petersburg. In the first, proceeds declined by 19% over the year, while in the second they declined by 13%. In 2022, the share of Moscow and Saint Petersburg in total proceeds from the sector grew relative to 2021, however, this was due to a deeper decline of the indicator recorded in almost all the other regions.


1 The analysis is based on data from the Federal Tax Service of Russia’s statistical tax report forms for the regions included in the reporting.

Figure 1. The shares of financial sector corporate income tax proceeds of Moscow and Saint Petersburg grew due to a deeper drop in the indicator in other subjects




Sources: Federal Tax Service of Russia, ACRA 

Real estate sector. The real estate sector was in second place in terms of the rate of decline in corporate income tax revenues in 2022 (a drop of 32% year-on-year). Moscow, the Krasnoyarsk Krai, Saint Petersburg, the Moscow and the Murmansk Region accounted for the main proceeds from this tax. Real estate transactions include buying, selling, leasing, and managing property, as well as rendering intermediary and consultancy services. In ACRA’s opinion, the high shares of this sector in tax revenues should by no means be considered a consequence of the presence of large taxpayers in the industry[1]. It is possible that this is how the influence of companies that are responsible taxpayers and part of consolidated taxpayer groups is manifested. Corporate income tax of all companies from these groups transferred into the revenues of the consolidated budgets of the regions in 2022 was almost 8% higher than the indicator for 2021. At the same time, last year only Moscow was able to maintain corporate income tax revenues in the real estate transactions segment at the same level as in 2021.

Figure 2. Moscow was the only region where proceeds from real estate did not decline in 2022*



* Among the regions whose contribution to the total revenues from the sector exceeded 1%.
Sources: Federal Tax Service of Russia, ACRA

According to the results of last year, the shares of the financial industry and the real estate sector in the structure of income tax revenues paid to regional budgets amounted to 7% and 4%, respectively.

Manufacturing sector. The dynamics of this sector, which generated a significant 19% of corporate income tax revenues of regional budgets last year (22% in 2021), were also negative (-18%). However, the sector trends are heterogeneous: some industries showed both deeply negative (wood processing, metals, production of petroleum products) and positive (food production, production of machinery and equipment) revenue dynamics.

Figure 3. Revenues from the manufacturing sector were heterogeneous in 2022 


In all the regions with developed woodworking industries (Kostroma, Moscow, Vologda, Arkhangelsk, Kirov, Irkutsk Regions, Komi Republic), the decline in revenues ranged from 47% to 81%. In the main Russian metal manufacturing regions (Belgorod, Lipetsk, Vologda, Sverdlovsk, Chelyabinsk Regions), the decrease was also very significant — from 54% to 71%. At the same time, it should be noted that the share of corporate income tax revenues from the woodworking industry did not exceed 1% of the total income tax revenues of regional budgets, while the share of metal industry was several times higher — 7% by the end of 2021 and 4% by the end of 2022.

A number of regions showed an increase of 100% or more of revenues from the food production industry, including regions where the share of this industry in the structure of tax revenues is significant (Moscow, Krasnodar Krai, Vladimir Region). However, there are also opposite situations: in some regions, revenues decreased, although the share of food industry in the structure of their tax revenues is high (Kursk, Rostov Regions, some of the Volga area regions). The share of this industry in the structure of total corporate income tax revenues to regional budgets is low (2% in 2022).

Figure 4. Corporate income tax revenues of regional budgets (largest in terms of revenues from industry)


Growing sectors. According to the Federal Tax Service of Russia, the best dynamics of corporate income tax revenues in 2022 were shown by the agriculture sector (+40% with a sector share of 1% of total corporate income tax revenues), trade (+29% with a sector share of 29%, the main contributors were Moscow, the Moscow Region, and Saint Petersburg), construction (+23% with a share of 4%), professional and research activities (+22% with a share of 6%), and the transportation and storage (+17% with a share of 5%).

According to the data reported as per form 1-NOM, corporate income tax revenues of regional budgets decreased slightly in absolute terms last year (by RUB 93 bln or -2%) and amounted to RUB 4.4 tln. The abovementioned industries had the greatest impact on the decrease in corporate income tax revenues: the financial sector (-RUB 208 bln), the manufacturing sector (-RUB 164 bln with multidirectional dynamics within the sector), and the real estate sector (-RUB 75 bln). Corporate income tax revenues in the mining sector decreased by RUB 23 bln (-3%) against 2021, with multidirectional dynamics within this sector: revenues from the coal mining industry surged, but revenues from the production of metal ores and oil and gas, on the contrary, decreased. The fall was smoothed out by trade, primarily wholesale (growth amounted to RUB 260 bln, or 33%), construction, transportation and storage, and professional and research activities, which, taken together, demonstrated an increase of more than RUB 100 bln. Thus, due to the positive dynamics in certain sectors, a significant decrease in total corporate income tax revenues was avoided.

Notably, the corporate income tax data reflected in the tax report forms does not always coincide with the data of the Federal Treasury. In particular, according to the Federal Treasury’s data as of January 1, 2023, corporate income tax revenues of regional budgets increased cumulatively by 3.6% year-on-year. The maximum data discrepancies were observed in the Tyumen and Arkhangelsk Regions, Khanty-Mansiysk Autonomous Okrug — Yugra, as well as the Yamalo-Nenets and Nenets Autonomous Okrugs, which is explained by the tax distribution specifics set forth by the agreements between these regions.

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Elena Anisimova
Senior Director — Head of Sovereign and Regional Ratings Group
+7 (495) 139 04 86
Svetlana Panicheva
Head of External Communications
+7 (495) 139 04 80, ext. 169
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