Автор:  Войтанович В. М.

Науковий керівник: Іванчук Н. В.

     In this article author have analyzed the reform of budget and tax areas, conducted for decentralization of financial resources of Ukraine and made estimation of their influence on the local budget revenues. Author have detected problems of fiscal decentralization implementation in terms of the overall economic crisis in Ukraine. Findings show the ways to increase the efficiency of the changes and proposed alternative directions of increasing revenue at the local level budgets.      

      Keywords: decentralization of financial resources, the revenues of the local budgets, tax revenues, interbudgetary transfers, personal income tax.

      Вплив процесу децентралізації фінансових ресурсів на доходи місцевого бюджету в Україні

    У статті здійснено аналіз реформ бюджетної та податкової сфери, проведених у процесі децентралізації фінансових ресурсів України та здійснено оцінку їх впливу на доходи місцевого бюджету. Виявлено проблеми здійснення фінансової децентралізації в умовах загальної економічної кризи в Україні. Розглянуто можливі шляхи підвищення ефективності реалізованих змін і запропоновано альтернативні напрями збільшення дохідності бюджетів місцевого рівня.  

     Ключові слова: децентралізація фінансових ресурсів, дохідна частина місцевого бюджету, податкові надходження, міжбюджетні трансферти, податок на доходи фізичних осіб. 

     Влияние процесса децентрализации финансовых ресурсов на доходы местного бюджета в Украине

    В статье осуществлен анализ реформ бюджетной и налоговой сферы, проведенных в процессе децентрализации финансовых ресурсов Украины и осуществлена ​​оценка их влияния на доходы местного бюджета. Выявлены проблемы осуществления финансовой децентрализации в условиях общего экономического кризиса в Украине.Рассмотрено возможные пути повышения эффективности реализованных изменений и предложены альтернативные направления увеличения доходности бюджетов местного уровня.   

   Ключевые слова: децентрализация финансовых ресурсов, доходная часть местного бюджета, налоговые поступления, межбюджетные трансферты, налог на доходы физических лиц.

     Problem statement. The experience of well-developed countries shows that a centralized management technique of financial resources reduces the effectiveness of their use, contributes to slowing of economic and social development in the country. Ukrainian scientists emphasized the importance and necessity of reforming budget and tax systems in case of increasing a level of local budget’s financial autonomy for a great while. This problem was aggravated in 2014. A series of actions was developed for centralization and the first results came into existence in 2015. Regrettably, the consequences of the reforms showed that the decentralization process requires detailed assessment and introduction of  corrective actions to achieve effective financial support of local budget.

    Analysis of late investigations and publications. A lot of national scientists devoted their own investigations to solving this problem. Among them: Yu. O. Nabatova, N.V. Prots, O.A. Filiul, A.M. Chushak. In their researches the analysis of Ukrainian budget system and estimation of the level of decentralization in the country was made. Ukrainian scientists outline the major problems of public sector and define possible ways for improving Ukrainian budget system and, what is more, define main tools for achieving the best allocation of resources between the centre and the areas. Despite the stupendous amount of research papers devoted to the question of financial resources’ decentralization, problems, which arose in the process of its fulfilling, and the ways of resolution remain unsolved. Special attention must be paid to taking into account the influence of general economic crisis in Ukraine over the process of reseparation of financial resources’ realisation and elucidating the alternative methods of increasing the local budget’s income for raising the effectiveness of centralisation.

    Aim and objectives of the investigation. The aim of the investigation includes identification of the ways of increasing the local budget’s income in the process of decentralization on the basis of theoretical researching and practical foundations of body of interest.

Ukraine started a new stage of politics in finance in 2014. Its foundation was given the ground by further budget and tax decentralizations worked out by Ministry of Regional Development, Construction, and Communal Living of Ukraine. A considerable amount of offers that are relevant to district development and pumping up the local budget came into action. According to this document, decentralization of budget financial resources considers:

– changing of taxation system, in which specific revenues for benefit of local budget are modifieded;

– changing of transfer politics, which is not based on the soviet guiding principle: “from each according to his ability, to each according to his need”

– empowering local governments to develop and implement various socio-economic programmes.

For conducting an analysis of decentralisation processes’ influence it is suggested to use reliable data on district budget which is an outstanding example for local finance’s scrutiny.  Actually, allocation of disbursements on the level of district budget provides the maximum possible public services to their direct customers. While allocating costs on the level of district budget, needs of each sector are met by financial resources, which are needed in case specific activity of the market participants. It insures being in keeping with a principle of subsidiarity and is a topical issue during the period of economic decentralization in Ukraine. Lutsk district budget can be provided as an example.

An estimation of consequences of the deceltralisation’s process could be done analyzing financial revenue of district budget for 2013-2015, especially because the reform’s realisation was initiated in 2014.  It is first necessary, however, to examine the dynamics of approved and actual revenues of Lutsk district budget for 2013-2015 (information in table 1).

Table 1

The dynamics of income in Lutsk district budget 2013-2015 years





Actual data, thousand UAH Deviation
2013 2014 2015 2015/2013
Absolute value, thousand UAH The relative importance, %
The amount of approved revenues 217484,47 247400,68 281117,03 63632,56 29,26
Actual incomes 215711,22 251615,59 298574,4 82863,18 38,41
The percentage fulfillment of the plan, % 99,2 101,7 106,2 x 7,00

According to provided data, the amount of approved revenue in the district as well as actual one increased annually. From 2013 till 2015 the amount of income, which reached the district budget, escalated by 82,9 m. UAH. or 38,41%. It suggests the possibility of further increasing the revenue of the local budget and increasing the expenditure of needs on the local level. It is crucial to outline that the district budget’s revenue was overfulfilling since 2014, which means the success of the ongoing reforms.

The factors that influenced these changes have to be analyzed. Government has made changes on district budget revenue in the budget and tax legislation. In particular, the share of personal income tax as the most significant source increased by 10%. It allowed to use 15741,72 thousand UAH. additional funds to the budget, which increased tax revenues by 39,6%. On the contrary, many sources of income were cancelled for the district budget: the fee for registration of juridical persons and natural persons, the fee for the land, the fee for certain categories of business and fixed agricultural household tax. These changes brought about the situation when the personal income tax became the only source of tax incomings in the district.  Most part is paid from such sources of income as salaries, as shown in table 2.

Table 2

Volumes and structure of the personal income tax in Lutsk district budget in the 2013-2015 years

Type of personal income tax:


2013 2014 2015
thousand UAH % thousand UAH % thousand UAH %
Income tax from the wages 38246,48 96,20 41488,50 94,19 50828,55 91,59
Total income tax 39756,48 100 44048,06 100 55498,20 100

Therefore, changes that will increase revenues to the local budget should be related to the impact on wages, and as a result – on this tax. The authorities announced the process of legalization of wages in 2014 that will allow companies in the country reflect the costs of labour objectively and do not evade tax payment connected with it. In 2016 was introduced a single rate of personal income tax– 18%, which replaced the previous diversified table and helped to increase revenues to local budgets. As an example can be provided a significant increase in tax revenues showed in table 1. Another influential factor of paramount importance was the introduction in 2016 of the general rate of Single Social Due as 22% instead of the large number of rates that were in force in 2015. Furthermore, despite the fact that revenues from the personal income tax from sources other than wages are much lower, they are also noteworthy. In 2015, the progressive rate of unearned income’s taxation was abolished and the tax rate was fixed at the level of 20%. In 2015 it assured income amount of 1,802 thousand UAH. to the Lutsk district budget. On the whole, due to those changes the share of income taxes for natural persons from income other than wages tripled in the structure of total tax revenues from 2,1% to 6,2% over the period [2,3].

Still decentralization did not help to reduce the amount of interbudget transfers, and that can be seen in the example of Lutsk district budget. On the contrary, during the period their size has increased to 58599,06 thousand UAH., or 35,42%. This phenomenon indicates the existence of serious shortcomings in the program of fiscal decentralization, yet transfers which are passed to the budgets of lower levels have the form of subventions. The funds received by the district budget from the budget of higher level have special transmission and are usually intended to finance protected items of expenditure. Hence, local governments are not able to influence over usage of these funds, that significantly reduces the financial autonomy of local budgets. Unfortunately, this situation is typical for all local budgets in Ukraine.

Therefore, the process of decentralization requires implementation of numerous changes for further increase in local budgets’ revenues. At first, all actions should be directed to the continuation of legalization of wages in the country. Reduction of taxes could help to boost its implementation. If we consider other levels of local budgets, the impact of the single tax as local revenue should also be considered. Since January 1, 2016 simplified tax system was amended. Due to increasing percentage of 3 group from 2-4% to 3-5%, revenues to local budgets could increase significantly. The contributed amendments helped to increase the revenues in 2015. In particular, during the first quarter of 2015 Lutsk district’s taxpayers, who are using the simplified tax system, paid to local budgets 15,8 m. UAH. of a single tax. Compared to the same period last year, revenues increased by 3,4 m. Therefore, changes in the proceedings of the single tax can be an effective way to increase local budget’s revenues [1].

The problems of land tax also should be concerned. The difficulties lie in the fact that the assessment basis is still not completed at the proper level in Ukraine. For instance, in the Lutsk district information about only 10% of the land is available. The income from tax revenues can be significant. Only during January – March 2015 from landowners and landusers of the Lutsk district was received the sum of 16 m. UAH. and it was one of the important sources of income of the local budget. The problem of control relates to paying all taxes at the local budgets’ level.

In contrast to the level of the district budget, the share of revenue from personal income tax for natural persons was reduced for all other local budgets. The situation for them was put in equilibrium by revenues from excise tax on retail trade, which has grown and now transfers to local budgets. Due to consumers of excisable goods all local budgets of Volyn region received 110,5 m. UAH. on August 1, 2015. As a result of seven months 2015 Lutsk district is in the leading position among others according to the sum of revenue of this tax.

    Summary. The process of decentralization enabled an increase of the revenues to the Lutsk district budget in Ukraine in 2014-2015. Amendments in tax and budget spheres boost growth of revenues from taxes on natural persons’ income, land taxes, single tax and excise. However, there is a stupendous amount of problems in such a process that require to be solved out. That comprises of: a significant prevalence of transfers in local budget’s structure, existence of inhabitants’ black income, lack of updated databases of taxpayers and objects of taxation, which bring about the problem of controlling taxes. The changes which were proposed in this article enable to  increase revenues to the local budgets and improve the process of decentralization in Ukraine. Particularly, the stimulation of districts to increase their revenues instead of transfers could increase the financial independence of local authorities. Reducing the black part of wagefunds could increase revenue from personal income tax. Creating new and updating existing databases could stimulate the increase of incomings to the local budget and reduce the level of evasion from tax payment. This and other kinds of supervision allow to use efficiently existing resources in the district.

List of sources:

  1. Gaba IM “Decentralization” – some the pluses and minuses / I.M.Haba // RayonInfo. – 2014.-№1.-С.5;
  2. The Budget Code of Ukraine with amendments from 13.02.2016 [electronic resource]. – Access mode:;
  3. The Law of Ukraine “On Amendments to the Budget Code of Ukraine on the reform of intergovernmental relations” from 28.12.2014 p. 79 number-VIII [electronic resource]. – Access mode: http://
  4. The Institute of budget and socio-economic research [electronic resource]. – Access mode:І_2014_Monitoring_ukr.pdf
  5. The official portal of the State Fiscal Service of Ukraine [electronic resource]. – Access mode:–/

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