Subventions in income generation of local budgets in Ukraine

Abstract

The article considers the national practice of generating local budget revenues through subventions. It is stressed that within intergovernmental relations they provide an opportunity to allocate a fixed amount of funds from a higher-level budget to a lower-level budget in order to balance the latter, when there is an excess of expenditure over revenue. It is pointed out that the growth of their percentage results in reduced motivation of local authorities to increase their financial base, inertia of regional elite and dependency.It is also noted that within intergovernmental relations subventions play a key role in government support for social initiatives of local bodies and capital investments. They act as social transfers which provide approximately the same level of public goods and services across regions. An increase in the percentage of subventions within intergovernmental transfers positively affects the social environment of the regions.It is reasoned that the implementation of a new version of the Budget Code of Ukraine has made it possible to systematically use government support through intergovernmental transfers. In particular, local budgets would receive educational and medical subventions for carrying out investment projects. It is obvious that social support for local development is essential and undisputable, even though it diverts significant funds from the implementation of economic programmes and measures.A particular attention is paid to subventions for the implementation of investment projects which are seen as intergovernmental transfers that stimulate sustainable development of the territories. However, differences in geographical location, climate conditions, demographics and other factors impede its full availability to depressed regions. The relative weight of these subventions has been rather low and ultimately deteriorating to their successful functioning.