Financial Equalization Research Articles

Financial Constitution Issues in Development of the Basic Law for the Federal Republic of Germany in 1948-1949

This article analyzes the key problems of the financial constitution in the development of the Basic Law for the Federal Republic of Germany (FRG) in 1948-1949, based on materials from the Constitutional Convention at Herrenchiemsee and the Parliamentary Council of West Germany. It emphasizes that the relevance of this issue was influenced by Germany’s historical development, which had a long-standing experience in both regional and imperial financial administration. This led to high significance of financial constitution issues in post-war West German politics. It is concluded that the main approaches to this problem were developed at the Herrenchiemsee Convention in October 1948, and the main content of the financial section of the Basic Law was formulated in the financial committee at the beginning of October 1948. A key role in developing the financial constitution was played by parliamentarian H. HöpkerAschoff. However, until May 1949, the parties could not reach a consensus on matters of financial administration system and financial equalization. This was significantly influenced by constant objections from the occupying administrations, the position of the Christian Social Union in Bavaria (CSU), uncertainty in assessing financial conditions, and the Social Democrats’ consistent defense of broad financial powers for the federal center.

INTERBUDGETARY RELATIONS IN THE SYSTEM OF BUDGET REGULATION

Introduction. The article is devoted to the study of the essence of interbudgetary relations in the system of budgetary regulation, key aspects of their regulation, instruments of interbudgetary relations and their application in Ukraine under martial law. The purpose of the article. The purpose and objective of the article is to study the essence and relevance of the problem of formation of interbudgetary relations under martial law. Results. The author analyzes the approaches and defines various aspects of the essence of intergovernmental fiscal relations based on the literature. The characteristics of different approaches to the interpretation of the essence of the concept of ‘intergovernmental fiscal relations’ are presented. The mechanism of horizontal equalization of the tax capacity of the territory is outlined according to the Budget Code of Ukraine. The mechanism of transferring intergovernmental transfers from the state budget to local budgets and intergovernmental transfers between local budgets is determined. The author considers the types of subsidies and subventions provided from the State budget to local budgets. Their amounts are analyzed. It is proved that the system of horizontal financial equalization redistributes financial resources in favor of those local authorities which have an imbalance and provides partial compensation for the losses of local budgets of territorial communities from the lack of personal income tax. Conclusions. It is concluded that the financial basis for the development of any state is budgetary funds. Interbudgetary relations are the main instrument for ensuring the proper functioning of the national budget system.

Tools for financing local economic development of local communities

The study examined the specific features of using the instruments of financing the economic development of territorial communities on the example of Ukraine. Economic and statistical analysis methods were used to process the data, including the Wilcoxon signed-rank test for comparing growth trends. The study identified the most common sources and tools for financing the economic development of local communities, in particular tax revenues, grants, loans, public-private partnerships. The financial instruments of local economic development in the UK, Denmark, and Slovenia were analysed, focusing on their flexibility, adaptability, and efficiency. The importance of integrating the best practices of these countries into the strategic financial management of territorial communities of Ukraine is substantiated. Specific recommendations for implementing successful international experience are proposed. It is recommended that Ukraine introduce monitoring and control systems similar to the British ones to ensure strict control over local budget expenditures, which is important for the stability and transparency of financial governance; consolidate or redistribute competencies in favour of larger communities, increase the share of local taxes, and introduce financial equalisation mechanisms to reduce financial inequality and ensure equal opportunities for all communities, as the Danish experience has shown. According to the Slovenian experience, it is necessary to develop clear standards for the provision of services, create independent supervisory authorities to monitor the effectiveness of local budgets, introduce fiscal decentralisation, and increase the share of local taxes to increase the autonomy of local authorities and reduce the disparity in the level of services between regions. The results obtained emphasised the importance of using an integrated and integrative approach to the development and management of financing tools for the local economic development of territorial communities. The practical significance of the study’s findings is manifested in the provision of specific recommendations on the use of various financing instruments, such as local guarantees, municipal bonds, and loans from international financial institutions and grants from international donors. These recommendations can help determine investment priorities and improve investment planning and management processes, which is important for the development of territorial communities

Система фінансового вирівнювання в Україні в умовах сучасних викликів: основні проблеми та напрями їх вирішення

Introduction. The introduction of a new equalization system in Ukraine is faced with problems related to the inconsistency of the redistribution of resources and powers between state, regional and local authorities, the instability and inconsistency of legislative innovations, the unreasonableness of the calculation of the tax capacity index, etc. Problem Statement. The existence of significant economic and financial imbalances in the development of the territories of Ukraine necessitates the search for an optimal model of financial equalization. This question is actualized in the conditions of modern challenges. Purpose. To identify the main problems of the financial equalization system in Ukraine and to find ways of their solving.. Methods. In the research process such methods as structural-logical, comparative analysis, systematic approach, historical and statistical and others were used. Results. It was found that the domestic model of financial equalization should be identified as a combination of three components: vertical equalization through split taxes; horizontal equalization of the fiscal capacity of budgets and equalization by expenditures through a set of targeted transfers.The article identifies the main problems of financial equalization, namely: the calculation of the index of the tax capacity of territorial communities, which is based only on income from one tax (personal income tax), does not ensure a fair distribution; the inclusion of personal income tax at the place of registration of business entities helps to strengthen the differentiation between the center and the periphery; the predominance of targeted transfers reduces the independence of local self-government bodies in decision-making; poor use of expenditure equalization tools has led to significant imbalances in the ability of communities to provide public services. Conclusions. The solution to the mentioned problems is proposed by: implementing the mechanism of personal income tax crediting to local budgets by place of residence, and not by place of work of individual payers; calculation of the tax capacity index, taking into account the entire volume of tax revenues to the general fund of local budgets; the growth of the share of untargeted transfers in the structure of the system of financial equalization of territories in Ukraine and others.

Ризики реформи місцевого самоврядування в Україні

The implementation of local self-government reform in Ukraine is accompanied by a number of risks. The article considers the following as the main risks: differentiation of communities according to the level of their own incomes, lack of a clear distribution of powers, imbalance between powers and resources, insufficient self-sufficiency of communities, dependence on inter-budgetary transfers, imbalance of budget equalization mechanisms, low level of qualification of community leaders, insufficient control over on the part of the state, contradictions between local and state interests, corruption, lobbying for the distribution of interbudgetary transfers, blind copying of the experience of developed countries. These risks are mostly interrelated and should be considered as a whole. The ambiguity of the manifestation of positive results and risks of decentralization in different countries is largely due to the influence of many factors and relations within the socio-economic systems of the national, subnational and local levels. This leads to a very cautious copying of the experience of other states and requires an in-depth analysis of opportunities and potential threats during decentralization within each country, to comprehensively take into account socioeconomic and political factors, as well as factors of an objective and subjective nature. Leveling the above-mentioned risks requires improvement of legislative regulation mechanisms and financial equalization tools.

Changes in the distribution of personal income tax revenue as a challenge for the system of financial equalization of local budgets in wartime conditions

In the conditions of the decrease in economic activity in the war with Russia, the personal income tax on military personnel’s allowances was a significant source of local budget revenue for many territorial communities. Its volume increased due to the increase in the number of military units and military personnel, and the increase in the level of their salaries. Such trends increased the horizontal budget imbalances. The article aims to analyze the changes in the distribution of personal income tax revenue in the context of its impact on the revenue capacity of local budgets, as well as to develop proposals for improving the system of financial equalization in Ukraine in wartime conditions. The article analyzes the local budget imbalances caused by the uneven distribution of local budget revenue from the personal income tax on military personnel’s allowances. The specifics of the equalization system in Ukraine are clarified. On the one hand, it is tied to one tax – personal income tax, on the other hand, the dependence of local budgets on personal income tax is significantly higher than in other countries. The influence of the decision to redirect personal income tax on military personnel’s allowances from local budgets to the state budget on the financial equalization system is examined, and the question of the fairness of the current equalization system in Ukraine is raised. Various options for the distribution of revenue from personal income tax on military personnel’s allowances are analyzed, and the necessity and importance of implementing the mechanism of crediting personal income tax to local budgets by place of residence, and not by place of work of individual payers, is substantiated. This mechanism is effective and works in most foreign countries. In general, there are a number of options for implementing changes to the procedure for crediting personal income tax at the place of residence of an individual payer. The use of such experience makes it possible to develop one’s own version.

New regional policy of Ukraine: tools and directions of response in the context of modern challenges

The experience of the new regional policy of the EU and its implementation in the domestic economy is important for Ukraine, which, on the one hand, is facing the unprecedented challenge of the war with Russia and its destructive influence on the economy and infrastructure, and, on the other hand, under these conditions has received the status of a candidate for EU membership, and has thus taken an important step towards EU membership. The purpose of the article is to research new approaches to the formation of the regional policy of Ukraine and the directions of its convergence with the regional policy of the EU. The article defines the directions of convergence of regional policies of the EU and Ukraine, namely: synchronization of development planning periods, stimulation of development of functional types of territories, common principles of regional policy formation, etc. The advantages and disadvantages of the use of regional development tools in Ukraine are analyzed, including regional development strategies, regional development agencies, typology of territories, the system of financial equalization of territorial development, etc. The peculiarities of the development of the domestic regional policy related to its implicitness, the shift of the emphasis from the regional to the local level, and the reduction of the resource and institutional capacity of the regions are outlined. The main challenges and risks of Ukraine’s regional policy caused by the war, reforms, and peculiarities of national and regional administration are defined and directions for their leveling are outlined. The article emphasizes that the prospects for the development of territories in Ukraine should be planned taking into account structural changes in the economy, business relocation, changes in the structure of population resettlement, changes in logistics chains, the permanent threat of the neighborhood with the Russian Federation, etc. The primary tasks should be the following: making changes in the strategic documents of the state and regions, creating a fund for the restoration of territories, changing the approaches to financing regional projects, and strengthening cost equalization.

PENGARUH PAD, DAU, DAK TERHADAP PERTUMBUHAN EKONOMI DAN KEMISKINAN PADA KABUPATEN/KOTA DI INDONESIA

This study investigate the effect of Local Revenue (PAD), General Allocation Fund (DAU), Special Allocation Fund (DAK) to economic growth and poverty at district/city in Indonesia for 2012-2014. Research using the method of path analysis with secondary data in the form of a panel consisting of 33 provinces include 441 district/city in Indonesia were sourced from the Directorate General of Financial Equalization (DJPK) and the BPS-Statistics Indonesia. Results shows that the PAD and DAU effect on economic growth in each district/city area. Otherwise DAK has no effect against economic growth. In addition, this analysis also showed that PAD, and DAU effect on poverty, but DAK had no effect against poverty at district/city in Indonesia. While economic growth would also have an effect on poverty. From the analysis also looks that indirectly PAD, and DAU to decrease poverty through increased economic growth.

FINANCIAL CAPACITY OF LOCAL BUDGETS IN A DECENTRALIZED ENVIRONMENT: PROBLEMS AND WAYS TO SOLVE THEM

Topicality. Statement of the problem. Effective implementation of own and delegated powers by local self-government bodies depends on the ability to independently solve issues of local importance at the expense of own sources of funding. The modern system of allocation of budget resources does not ensure the necessary level of independence of local self-government bodies in solving socio-economic problems of territorial communities and needs to expand its own revenue base and introduce the decentralized principle of budgeting at the local level. The Aim of the study. Monitoring of problematic aspects of financial support of local self-government bodies and justification of ways to strengthen the financial capacity of territorial communities under conditions of budget decentralization. Methodology. In the process of carrying out the research, general and special methods of scientific research were used: scientific analysis and synthesis - for the theoretical generalization of the results of research by scientists on the issues of forming local budgets and strengthening the financial autonomy of local authorities; comparison, analytical and observation - to monitor the financial capacity of territorial communities of the Chernivtsi region; abstract-logical method of research - to substantiate proposals for the introduction of an effective model of financial equalization of the income base of local communities. The results. The article examines the peculiarities of financial provision of local self-government functions under conditions of budgetary decentralization. On the basis of the assessment of financial potential of territorial communities, problematic aspects of ensuring the financial independence of local authorities are singled out and ways of solving them are proposed. Practical meaning. As a result of the conducted research, the ways of strengthening the financial self- sufficiency of the budgets of territorial communities were substantiated and the conceptual foundations of the development of local self-government under the conditions of the reform of the decentralization of powers were outlined. Prospects for further research. Decentralization of the management of budget funds and the reform of the system of inter-budgetary relations determine the development of strategic priorities of budget policy regarding the formation of local budgets, which are aimed at ensuring financial stability and economic growth of territorial communities.

BUDGET POLICY OF HYDROCARBON TRANSPORT ENTERPRISES IN THE FIELD OF DECARBONIZATION

The socio-economic situation of each community, regions and the country as a whole, the implementation of functions and tasks of all authorities, the efficiency of public services and the effectiveness of all participants in the budget process depend on properly organized management of the budget process. The budget process is a continuous process of consistent action aimed at ensuring the sustainable functioning of the budget sector and funding other priority programs and activities. With the implementation of administrative-territorial reform and decentralization of power in Ukraine, the system of inter-budgetary relations and budget equalization in particular has changed. To strengthen the financial base of local budgets, the vector of regulation was shifted from equalization “by expenditure” to equalization “by income”. However, the introduction of a new system of financial equalization is associated with a number of risks. Ukraine’s oil and gas industry has always been one of the main budget-generators, but the activities of its enterprises are accompanied by the risks of man-made disasters, the consequences of which lead to greenhouse gas emissions. In this article, the authors emphasize the need to form a carbon tax as a compensator for the greenhouse effect and the formation of a quality socially responsible budget policy of enterprises that transport hydrocarbons. A brief overview of the principles and grounds of budget policy of Ukraine. An analysis of carbon pricing initiatives has been made. A list of determinants influencing the decarbonisation process is proposed, and carbon pricing should be based on economic and environmental assessments of man-made risks, as none of the available carbon pricing instruments in the world set the price at a level that would reduce global greenhouse gas emissions.

ՏԵՂԱԿԱՆ ԻՆՔՆԱԿԱՌԱՎԱՐՄԱՆ ԽՆԴԻՐՆԵՐՈՒՄ ՊԵՏՈՒԹՅԱՆ ՊԱՐՏԱՎՈՐՈՒԹՅՈՒՆՆԵՐԻ ԻՐԱԿԱՆԱՑՄԱՆ ԱՌԱՆՁՆԱՀԱՏԿՈՒԹՅՈՒՆՆԵՐԻ ՄԱՍԻՆ / ON SPECIFIC FEATURES OF IMPLEMENTATION OF STATE RESPONSIBILITIES IN THE MATTERS OF LOCAL SELF-GOVERNMENT

The article addresses the fundamental issues of implementation of responsibilities of the state vis-a-vis the system of local self-government. In particular, it argues that the responsibilities of the state in matters of local self-government are mainly related to ensuring the harmonious development of the communities. The article also reveals the impact of factors determining the effectiveness of this state policy on the actual results of the development of the communities. The article provides an interpretation of the notion of “harmonious development” and, in light of that, analyzes the specific features of such tools for implementation of responsibilities of the state as financial equalization, subsidies and subventions. It also examines the mechanisms for their application as defined in the current legislation as well as reveals the factors affecting the effectiveness of those mechanisms. On this basis, the article presents some conceptual approaches for the improvement of the existing legislative regulations of the mentioned tools and mechanisms.

ПОДАТКОВІ ДОМІНАНТИ ФІНАНСОВОГО ВИРІВНЮВАННЯ РОЗВИТКУ ТЕРИТОРІЙ В УМОВАХ ВОЄННОГО СТАНУ

Today, Ukraine and a few of European countries are faced with the acute problem of balancing the financial support of local socio-economic development. The introduction of military status in Ukraine has intensified procedures to rationalize financial support for the budgets of the united territorial communities, especially those located closer to the war zone. That's why, the study of theoretical and practical determinants of financial equalization is actual. The purpose of the article is to study modern aspects of effective use of financial equalization of territorial development, as well as substantiation of tax instruments to strengthen the fiscal potential of regions in the conditions of military status. The article highlights the objective reasons for financial equalization and outlines the forms of its implementation in Ukraine and some countries around the world. The accent is placed on the effects and risks of horizontal and vertical financial equalization. It is proved that the budgetary autonomy of the development of the united territorial formations is a key link in the combination of state and local economic policy. The role of tax regulation in inter-budgetary relations is investigated. It's proved, that stable tax potential is able to intensify the financing of priority requests for the development of the region (security, social protection, investment, innovation, infrastructure, etc.). The consolidation of the fiscal partnership in the conditions of military status was revealed in order to maintain the positive trends of budget revenues, in particular, due to the fulfillment of tax tasks and obligations. It's extremely important to ensure the prompt, proper and continuous execution of local budgets in the conditions of military status. Considerable attention in the article is paid to the proper ensuring of the tax capacity of the united territorial communities. The identifications of real and potential tax capacity of the territory makes it possible to rank it according to the level of realization of the fiscal potential of local authorities, which significantly improves the implementation of the principles of fairness and mobility of regional tax policy. Today, it's important to strengthen the tax capacity of the territory through the rational development of tax potential, because a favorable tax regime at the local level will produce investment effects and improve the socio-economic development of the region.

Տեղական ինքնակառավարման մարմինների կողմից իրականացված խախտումների և դրանց վրա ազդող գործոնների վերլուծությունը ՀՀ օրինակով / Analysis of the Violations Committed by Local Self-Government Bodies and the Factors Affecting Them by the Example of the RA

Proper implementation of authority by local governments is crucial for any country. For this reason, state authorities exercise control over the activities of community governing bodies. The paper is devoted to the study of the relationship between the number of violations revealed as a result of legal control, financial equalization subsidies and the number of population. Within the framework of the research, the annual growth rates of the above-mentioned variables were calculated and a linear regression model was developed, through which the relationship between the selected variables was presented. As a result of the analysis, it became clear that the number of violations is directly dependent on the number of the population and inversely dependent on the amount of subsidies provided to the communities.

ФІНАНСОВЕ ЗАБЕЗПЕЧЕННЯ ТЕРИТОРІАЛЬНИХ ГРОМАД В УМОВАХ АДМІНІСТРАТИВНО-ТЕРИТОРІАЛЬНОЇ РЕФОРМИ: ПРОБЛЕМИ ТА ПЕРСПЕКТИВИ

The article is devoted to the consideration of the peculiarities of legislative and normative and institutional support of the process of formation of the basic level of local self-government and transition to the new model of subregional system. The issue of ensuring the financial autonomy of territorial entities is identified, namely: delegation by the state of additional budgetary powers to the level of local government budgets without adequate funding and additional sources of income at the local level. The volume of educational and medical subventions did not meet the need for funds for certain purposes due to the lack of relevant relevant standards of budgetary provision of public services in the field of delegated powers. It is substantiated that increasing the level of financial independence of local authorities is a crucial factor in the economic development of regions, which will create a financial basis for providing residents of local communities with high quality and affordable public services. The transfer to the level of local self-government of a significant amount of national powers without adequate financial resources requires the introduction of a new model of financial equalization of territorial communities aimed at strengthening their income base. The chosen model of decentralization in Ukraine did not avoid the formation of communities with low resource and financial capacity. It is proved that expanding and optimizing the sources of filling local budgets of territorial communities, increasing the powers of local governments in managing financial resources and increasing their independence is an extremely important task. Its solution will help increase the level of financial independence of local authorities and the quality of their tasks and functions. The author outlines the directions of optimization of the mechanism of financial equalization of the income base of local communities. Fiscal policy in terms of local finances should be aimed at forming financially viable local governments, as the availability of sufficient funds in community budgets will allow to quickly and efficiently address socio-economic issues at the local community level and promote its further development.

Sustainable development of network interaction between business structures and local governments

There is a long-term dependence of most regions on federal budget subsidies in Russia. The policy of artificial financial equalization of the regions can create a dependent mood in weak regions and deprive the incentive to develop strong regions. In the Covid-19 era, the regions of the Russian Federation must find alternative sources of financing for their projects, including entrepreneurial ones, for example, through “people`s financing” and activation of territorial development based on the crowdfunding mechanism. The main purpose of the article is to consider the prospect of using crowdfunding as a sector of the distributed economy as an alternative financial tool to develop network interaction between business structures and self-government bodies in Russia. According to the authors, the development of such practices is due to several factors: the mixed results of applying self-taxation practices in the regions of Russia; in some cases, there is opposition to this mechanism by the population; the introduction in 2020 of a regulator of crowdfunding platforms; the growing involvement of citizens in various IT platforms, including investment. Entering into this project financing scheme for both individuals, business entities, and local governments allows optimizing the economic potential of all participants in this network, and obtaining a synergistic effect from combining their resources.

독일의 재정조정법 및 기본법의 최근 개정 방향과 개정의 헌법적 의미

독일의 재정조정법 및 기본법의 최근 개정 방향과 개정의 헌법적 의미

IDENTIFICATION OF PROBLEMS OF FINANCIAL AUTONOMY IN LITHUANIAN RURAL MUNICIPALITIES

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.

The impact of regulatory and financial discrimination on China's low-carbon development: Considering firm heterogeneity

Firms in China within the same industry but with different ownership and size have different production functions and face different emission regulations and financial conditions, thus can give very different responses to environmental policies. This fact has been largely ignored in most of the low-carbon development related literature. Using an augmented Chinese input–output table in which information about firm size (large- and small and medium-sized firms) and ownership (state-, foreign-, and private-owned firms) are explicitly reported, a dynamic computable general equilibrium model is developed in this study to analyze the impact of alternative low-carbon policy designs with different regulatory coverage and financial equalization on heterogeneous firms. Our simulation results show that, with the fully balanced regulation coverage and equalized financial system for heterogeneous firms, the total green investment accounts for 4% of GDP in 2030 for fulfilling China's commitment to reduce carbon emissions, which is the lowest among the various scenarios; about one-third of this investment is made by small and private firms; at the same time, green investment efficiency will be the highest, about 84% higher than that of the business-as-usual level. Therefore, a market-oriented and new technology-driven arrangement and mechanism for sharing emission reduction burden and allocating green investment across heterogeneous firms, especially to small and medium-sized firms, is crucial for China to achieve a more ambitious emission target in the long run.

Financial divergences of equalization and their impact on regional development in Morocco

The purpose of this article is to analyse the impact of financial equalization on regional development in Morocco. While the redistribution of wealth through the financial equalization mechanism promotes equality and equity in favour of poor and disadvantaged regions, this mechanism still suffers from several shortcomings. The following analysis confirms that financial equalization has an amortization effect both on the donor regions that are forced to allocate part of their resources and on the recipient regions that risk falling into a development trap. Notwithstanding this analysis, equalization promotes solidarity and equality between territories; however, the actual situation on the ground confirms that this mechanism does not encourage beneficiary regions to improve their tax effort or develop their development strategies. The effectiveness of the equalization system therefore requires a detailed understanding of the reasons for inequalities in order to act on the causes rather than on the symptoms. Points for practitioners In the processes of territorial public management, the scarcity of financial resources is all the more reason to opt for more efficient investments. The quality of investments is more important than their quantity. The adoption of such an approach is a strategic move if disastrous consequences on public facilities are to be avoided in the long term. The various levels of local authorities must also take responsibility for improving their own resources and building up their development strategies.

PRIORITIES FOR THE DISTRIBUTION OF INTERBUDGETARY TRANSFERS UNDER THE CONDITIONS OF FISCAL DECENTRALIZATION IN UKRAINE

The article is devoted to the problem of the distribution of intergovernmental transfers in Ukraine, taking into account fiscal decentralization trends. To perform the delegated functions, local governments need to have sufficient funding. However, the revenues of local budgets are insufficient to cover all necessary expenses. Therefore, inter-budget transfers, which in Ukraine are the main instrument of financial equalization, play an important role in ensuring the implementation of delegated powers by local governments. The aim of the article is determination of the priorities for the distribution of intergovernmental transfers in Ukraine in the context of fiscal decentralization. The research methodology combines quantitative and qualitative methods. Using quantitative methods, the principles of fiscal decentralization in Ukraine are observed through the mechanism of distribution of intergovernmental transfers. Using high-quality methods and based on the analysis, the priorities of the distribution of inter-budget transfers in the context of fiscal decentralization are formulated. An analysis of foreign publications on fiscal decentralization has shown that the uncertainty of priorities in this area reduces the effectiveness of fiscal decentralization and inhibits the economic development of regions. Prioritization of the distribution of intergovernmental transfers is preceded by the definition of principles for the distribution of intergovernmental transfers. Based on the results of a quantitative analysis, namely, the identified dynamics of fiscal decentralization indicators and the impact of the distribution of intergovernmental transfers on economic development, the following priorities for the distribution of intergovernmental transfers in fiscal decentralization are identified: supporting the prevalence of targeted transfers over non-targeted transfers, increasing the share of capital transfers, increasing the accountability of local authorities self-government regarding the use of funds received in the form of intergovernmental budget transfers.