IDENTIFICATION OF PROBLEMS OF FINANCIAL AUTONOMY IN LITHUANIAN RURAL MUNICIPALITIES

Abstract

The scientific problem addressed by the article is the lack of the ways for identification and solution of the issues of financial autonomy in rural municipalities. The aim of the article is to identify the problem areas of financial autonomy in Lithuanian rural municipalities. The problem areas of financial autonomy in rural municipalities have been identified under the methods of scientific literature analysis, document analysis, and statistical data analysis, and comparative analysis. The problematics of definition of the phenomenon of financial autonomy of rural municipalities has been noticed; problem areas of expenditure, revenue, financial transfers and borrowing in the municipalities have been identified. The empirical study of the data on 50 Lithuanian rural municipalities reflecting their respective financial autonomy in the period 2014-2018 (municipality revenue structure, revenue per capita, the dynamics of the share of the personal income tax (PIT)) revealed that the major share of the revenues of rural municipalities is collected by means of the PIT. There are four donor municipalities in Lithuania – Vilnius city, Kaunas city, Klaipėda city and Neringa municipalities – with their PITs used to support rural municipalities. The central authorities of Lithuania apply inter-budgetary reallocation of funds in order to introduce the financial equalization measures to adjust for the unequal allocation of potential financial resources between the municipalities with the ultimate objective of eliminating the territorial, social and economic disparities between the municipalities. However, the revenue and expenditure remain unequalized between the municipalities.