Social-Economic Principle in Apportionment of Corporate Profit Tax Paid by Consolidated Group of Taxpayers

Consolidated group of taxpayers (CGT) in Russia, where the profit tax is very important source of regional budgets revenues, intensified importance of profit tax apportionment. The fact that CGT spans multiple regions has caused changes in the established procedures for the distribution of the profit tax among regional budgets. This has induced unpredictable profit tax revenues and conflicts of interests between the affected territories. Starting from 2015, in Russia was proclaimed a moratorium on creating new consolidated groups of taxpayers. This was due to the inefficient formula used for distributing the proceeds from the profit tax paid by the CGT participants. To resolve the situation, we suggest improved approach to the formula used for distributing the profit tax collected from CGTs. The suggested social-economic principle must base on three aspects: the contribution of each region into the state economy and the GDP, implementing factor-based approach, taking into account if the region is depressed (and how much). The suggested approach will facilitate the growth of the social and economic situation in the regions and improve social welfare.