VECTORS OF DEEPENING OF FINANCIAL DECENTRALIZATION IN UKRAINE

Abstract

Achieving cost-effectiveness of production and the provision of public goods require financial decentralization. It provides an opportunity to increase the extent to which public needs are met by public goods, which are undoubtedly influenced by regional and local characteristics. Financial decentralization implies the creation of a corresponding financial base for regional and local self-government. However, just the list of financial resources it generates does not prove the existence of regional and local self-government. It is necessary to investigate the structure of financial resources, recent trends in its change, identify problems in the financial support of local governments, as well as identify the main vectors for deepening financial decentralization in Ukraine.
Ukraine's own local budget revenue base has grown substantially since 2015, but the list of local taxes and fees has been expanded without a corresponding increase in the tax powers of local governments. Local government revenues gradually decreased the amount of national taxes and fees, which were offset by an increase in the share of interbudgetary transfers, including subventions. This slows down the processes of financial decentralization.
Deepening of financial decentralization is possible when strengthening the financial base of local self-government bodies will be carried out in the following areas: (i) providing local self-government bodies with fixed income and interbudgetary transfers to the extent necessary for the exercise of delegated powers; (ii) expanding the list and increasing the share of local taxes and fees that meet the theoretical requirements for the expediency of their transfer to local authorities; (iii) reduction of the share of interbudgetary transfers in local budget revenues; (iv) improvement of the mechanism of providing local budgets with interbudgetary transfers from the state budget of Ukraine mainly through the use of general interbudgetary transfers (grants); (v) facilitating the completion of the process of forming united territorial communities.
All these measures will deepen financial decentralization, additionally fill local budgets with financial resources, promote the development of local taxation, and give greater financial autonomy to local governments.