On April 7 the last of the regional round tables dedicated to the issues of budget and taxation decentralization was held in Kiev. The event took place within the framework of the information-communication campaign of reforming local self-governments and territorial power structure in Ukraine.

In these meetings local authorities and public familiarized themselves with the essence of budget and tax changes to be implemented as part of the decentralization reforms.  

Changes to the budget and tax codes of Ukraine introduced in December2014 became the most important step in the budget decentralization.

State budget for the year 2015 was formed with due consideration to these changes.

«Changes to the budget and tax codes of Ukraine introduced in December2014 were not just cosmetic measures. They stipulate the new form of financial support for the local budgets and also offer substantial innovations in the relations between state and local budgets.” –stated H.Markovych, deputy Director of the local budgets Department, head of the Directorate of local budgets planning under the Ministry of Finance of Ukraine.  

New budget legislation expands the rights of the local bodies and empowers them with budget independence, offering new revenues’ sources for the local budgets.

The reform of the inter-budget relations creates an incentive for the local communities to deal with their cost estimates more efficiently, to rely on self-sufficiency and to plan the expenses sparingly. Some share of the new local taxes allows the accumulation of additional resources up to 25 mlrd UAH within the local budgets. In general terms new system of inter-budget transfers will ensure additional resource of the local budgets approximately at the amount of 45 mlrd UAH.

According to the Ministry of Finance the introduction of the new model of the financial support of the local budgets they will receive additional resource of the general fund at the amount at the amount of over 22 mlrd UAH. And considering the balance of inter-budget transfers – over 40 mlrd UAH this year.

100% of the fees for the administrative services, 100% state duties, 10% of the private sector tax were transferred from the state to the local level. Besides, the revenues of the local budgets were increased due to excise tax from the retail sales of the products which should be excised ( beer, alcohol, tobacco products, oil products) at the rate  5% of the product’s cost. The taxation base expanded due to the introduction of the property (non-residential) tax and tax on the vehicles with large engine capacity. The local budgets will receive 80% of the environmental tax instead of former 35%.

Besides, the communities will get basic subsidy for the enhancement of the fiscal capacity of their budgets.

The joined communities, whose budgets are treated as the oblast’ and raion cities’ budgets will receive substantial benefits. Alongside with the above mentioned taxes, they will get 60% of income tax, and other revenues as well.

But the main thing is that now the local bodies will be able to decide upon the allocation of the these funds. 

 «As of today reform is already working in the communities. Specifically, the number of taxes has been reduced from 22 to 11. Moreover, the center of their management has changed too. For example an excise tax will be managed locally as soon as the excised products are sold” – explained Yu.Marchenko, the deputy head of the excise tax office under the Department of control over the circulation and taxation of the products which should be excised  by the State Fiscal Service.

The state has undertaken the entire responsibility for the educational services provided by the public education establishments, professional training in the vocational/technical schools, medical services, funding of the state social programs for specific categories of population. With this in view, local budgets will receive new transfers – education subsidy, subsidy for professional training and medical subsidy. 

Changes to the budget legislation will ensure economic growth even in the current year, counteraction to crisis phenomena in the financial sector of the economy and 100% achievement of local budgets goals.  

 «Fit results of the reform can be evaluated, at least, by the end of first six month of the year. However, we can already see certain pluses in the filling of the local budgets. They are manifested in the paved roads renovations, gentrification of the houses’ entrances, sewerage systems etc. So the resources in our very habitat are increasing.” – summed up S.Sharshov, director of the Department of local self-governance and territorial organization of power under the Ministry of regional development.   

Each event was attended by the experts from the Ministry of regional development, Ministry of Finance, Ministry of Health, Ministry of education and science, State Fiscal Service, as well as the members of oblast’, raion, town, village and settlement councils, financial departments and territorial bodies of the  State Fiscal Service.

Detailed information on inter-budget relations and decentralization can be found here: http://www.minfin.gov.ua/control/uk/publish/article?art_id=409980&cat_id=397854

Participants of the current events:

• S.Sharshov, director of the Department of local self-governance and territorial organization of power under the Ministry of Regional development;

• Ye.Kuzkin , director of the Department of local budgets  under the Ministry of Finance;

• N.Privalova, director of the Department of the methodological work on taxation issues under SFS of Ukraine

• A.Kuplivanchuk, acting director of Financial/Economic Department of the Ministry of Health

• O.Shcheglova, deputy director of the Financial/Economic Department of the Ministry of education and science

• D.Vasilyev, coordinator of the communication campaign of the decentralization of power initiative, round table moderator.

The series of round table meetings on budget decentralization were supported by Swiss-Ukrainian DESPRO project and UK government. Round table meetings on budget decentralization in2015 are organized by the Ministry of regional development together with Ministry of Finance, Ministry of Health, Ministry of education and science, State Fiscal Service, with the participation of the leaders of oblast’, raion, town, village and settlement councils, financial departments and territorial bodies of the State Fiscal Service with the involvement of international projects and programs. 

The series of round table meetings have been held already in Dnipropetrovsk, Odessa, Lviv, Ivano-Frankivsk, Kharkiv.