Reforming land valuation and taxation in Ukraine: A path towards greater sustainability, fairness, and transparency

Problem setting. One of the basic principles of land law is the principle of payment for land use, which is enshrined in the Land Code of Ukraine and provides for the payment (in monetary terms) of the object, which is transferred to the property or use of the respective entity. At present, the essence of the principle of payment for land use is also revealed through the existence of a legal mechanism for payment of land, which includes land tax and rent for land of state and communal property (rent). These payments are provided for by the Tax Code of Ukraine. Land payment is a significant source of local budget revenue and is the second largest source of income after the personal income tax. Analysis of recent researches. A lot of scientists, in particular: M. P. Kucheryavenko, T. M. Shulga, E. M. Bogatyryova, Yu. I. Plotnikova, and others are trying to cover some aspects of modern legal regulation of land taxation. Article’s main body. The article is devoted to the study of the modern legal regulation of land tax in Ukraine and foreign states. The experience of OECD countries is explored. The author found that each state has a fairly well-established land tax model that provides for effective tax rates and benefits, an objective tax base, and so on. At the same time, differentiated taxation in different countries varies in terms of taxation, tax base, rates, methods of tax collection, fiscal powers of different levels of government, scope and amount of privileges, etc. A common feature of these countries is that in the rampant countries, the proceeds from the payment of a real estate tax or a pure land tax are directed to the development of urban infrastructure, so it is profitable for citizens to pay this tax. At the same time, the most effective systems of land taxation operate in the countries with developed land and real estate market, since the efficiency of taxation and increase of tax revenues to the budgets depend on the completeness of accounting of the objects of taxation. Conclusions and prospects for the development. Therefore, we consider it expedient and logical to apply the land valuation used in OECD countries. Unlike land valuation (currently in use in Ukraine), mass valuation makes it more fair to assess the taxation of land and its objects from the point of view of the objective distribution of the tax burden in the context of constant changes in the real estate market.

Starting in 2016, the process of financial decentralization began in Ukraine, in which local governments of lower levels (rural, urban, city councils and united territorial communities) were entitled to independently establish on their territory the rates of many local taxes and fees credited to community budgets. In particular, tax legislation of Ukraine allows local governments to vary land tax rates in the range from 0.1 to 3% of the normative monetary valuation of land, as well as to differentiate tax rates depending on the type of intended use of land plots. The study created a database and analyzed the spatial heterogeneity of land tax rates in more than 9.6 thousand communities. It is shown how the level of tax burden on land owners and land users, established by local self-government bodies, correlates with the economic development of the regions, as well as the normative monetary valuation of land, which is used in Ukraine as a tax base. The problems of taxation of real estate, which arise at the separate collection of land tax and tax for real property other than land, are considered, as well as suggestions on the necessity of introduction of tax zoning of territories in Ukraine, which will allow to further differentiate the rates of taxes on the property and provide more flexible and adaptive taxation of real estate.

Introduction. Problems of local budgeting in Ukraine, lack of financial resources of local authorities and instability of their revenue have been quite topical and still unsolved. Like most countries that emerged from the former Soviet Union, Ukraine has faced very substantial difficulties in maintaining economic growth while at the same time organizing an effective local government and fiscal structure and administration. An important aspect of this task has been to establish clearly defined property rights, including those in land, in order to facilitate market activities while also providing an appropriate fiscal base for local government. Purposes. The article is devoted to the problem of the formation of local authorities’ financial resources, local taxes and dues being their main source including land tax, to the process of formation of land taxation as well as to the definition of its role in the system of functioning of local authorities and state on the whole. The paper contains a comprehensive analysis of land taxation system, and shows its role and place in the state’s economic system. Proceeding from the analysis of the existing practice of land tax levying the author proves the necessity to reform land taxation, improve the mechanisms of levying land tax to insure full and timely income of land tax to local budgets. Results. Nature and structure of land taxation mechanism were proved and approaches concerning it construction in Ukraine were developed. Based on the realized analysis principal trends of collecting land tax in Ukraine were clarified, main factors which have the effect on forming of land taxation mechanism in our state were determined, problem aspects in land taxation which require improvement were emphasized. The mechanism of land tax application in foreign countries was investigated, main directions of land taxation processes optimization in Ukraine were proposed. It is proposed the improving the procedure for administering land tax in terms of conducting normative monetary valuation of land. Conclusions. It was proposed to improve the land tax in the area of its administration and the establishment of tax rates. The author has suggestions and proposals regarding legislation improvement in the sphere of legal regulation of land valuation in Ukraine.

Reforming Land Valuation and Taxation in Ukraine: A Path towards greater Sustainability Fairness, and Transparency