The practice of forming and strengthening the fiscal potential of local budgets in Ukraine

Abstract

Listen

Translate article

Introduction. The formation of the revenue side of local budgets under martial law in Ukraine is one of the key tasks for effective local government in territorial communities. They must establish effective cooperation with state authorities, particularly the State Tax Service of Ukraine, international institutions, specialized (public) organizations dealing with budget and tax administration issues, and business entities – taxpayers – to build sufficient fiscal potential in local budgets and ensure the sustainable development of territorial communities. It is necessary to substantiate ways of forming local budget resources by effectively using fiscal instruments, considering the current economic conditions under which territorial communities in Ukraine function. Research Objective. The purpose of this article is to monitor the theoretical and practical foundations of forming the fiscal potential of local budgets in Ukraine and to develop ways to optimize it to ensure the sustainable development of territorial communities in the current context. Methodology. General scientific and special research methods were used in writing the article, including systematic analysis, functional analysis, structural methods, statistical methods, comparison, synthesis, observation, induction, deduction, and other methods of scientific inquiry. Results. The theoretical and methodological principles of forming local budgets in Ukraine have been substantiated. An organizational framework for accumulating fiscal resources of territorial communities under decentralization in Ukraine has been developed. The analysis of state and local budget revenue by income categories showed a general upward trend in tax payments despite the challenges posed by martial law. It was found that the most fiscally effective algorithm is the collection and distribution of personal income tax across different levels of the budget system, confirmed by empirical calculations of the performance of the State Tax Service of Ukraine in meeting planned indicators. The study also revealed that, in practice, the functioning of territorial communities is mainly supported by revenues from local taxes and fees, particularly the single tax and land rent, while revenues from real estate taxes (other than land) have a lesser fiscal effect. There are certain fiscal losses in local budgets in frontline regions, requiring an adequate response from state and local authorities to stabilize the fiscal potential of these local budgets. Based on these trends, methods for increasing the fiscal potential of local budgets in Ukraine have been proposed, focusing on cooperation between local authorities and other fiscal entities, creating a favorable investment-innovative climate in the regions, using modern information systems and tax administration technologies, and following the key principles of budget resource formation applied in foreign countries.