Relations between economic entities, regions, countries are built through a system of finance (international, state, regional, at the level of specific enterprises). In the most general sense, the category of “finance” means a system of economic relations expressing the formation and use of funds in the process of economic turnover of an enterprise, region, country. The most important component of the public finance system and an effective tool for solving regional problems is the finances of the region, since their purposeful and effective use can have a positive impact on the development of a particular territory.
Of course, in order to solve the local problems of the regions, implement the principles of self-government and self-financing, relative financial independence of the regions is necessary. The term “relative” in this case denotes the need for a compromise between the provision of economic and financial independence to the region and the centralized distribution of public goods, carried out in order to smooth out interregional differences. The financial independence of the region is ensured through the system of financial resources of the region, which are understood as funds at the disposal of the region, its economic entities and population, formed in the process of distribution and redistribution of regional and national gross product and intended for expanded reproduction in this territory.
The region’s financial resources include:
resources of local budgets and targeted budgetary and extrabudgetary funds; enterprise funds; funds of the population; credit resources; funds on deposits, etc.
Assessment of the financial potential of the region and the development of a reasonable regional financial policy is carried out on the basis of a consolidated balance of financial resources of the region, which is understood as a monetary expression of the state (or forecast) of revenues and expenditures of the region, its budgets and extra-budgetary funds, as well as legal entities in this territory (Fig. 3).
In the revenue part of this balance, three groups of income can be distinguished:
own, that is, those that are formed due to the distribution and redistribution of income of enterprises, organizations and the population of the region; borrowed, which are long-term and short-term loans; transfers, that is, funds received from other budgets.
It is important to point out that attracting funds to the region is possible not only in the form of established transfers, but also on the basis of the development of a kind of territorial business plan that assesses the attractiveness of the region and the effectiveness of investments from the standpoint of the interests of the state.
The expenditure part of the regional consolidated financial balance fixes the priority areas for the use of financial resources in the region and determines the costs of education, culture, healthcare, maintenance of law enforcement and public administration bodies, etc. Variation in the content of expenditure items of the consolidated financial balance of the region is an important element in planning its development.
Revenues | Sum | Outlay | Sum |
Profit (total) Value Added Tax Excise taxes Personal income tax Property Tax Funds for other trust funds Environmental tax Depreciation and amortization Revenues from the republican state budget (total) including: – capital investments; – social expenditures (current expenditures) Payments for the use of natural resources Miscellaneous taxes, fees and other income State duty Other non-tax income | Investment costs, other than corporate profit costs Costs of reproduction of the mineral resource base Expenses of enterprises at the expense of profits remaining after payment of tax and depreciation (R&D, etc.) Expenditures on socio-cultural activities financed from the budget and extra-budgetary funds (without capital investments) Education Health care Physical education Social security Expenditures from other trust funds Expenses for the maintenance of government and law enforcement agencies Miscellaneous expenses | ||
Total Revenue | Total expenses Funds transferred: – to state extra-budgetary funds; – to the regional budget | ||
Total expenses Excess of expenses over income |