Uman NUH | today: 03/29/2023

Impact of the tax system of Ukraine on the functioning of local finance

Author(s) Barabash L.V., , , Uman National University of Horticulture, Ukraine
Ролінський О. В., , ,
Category Economics
year 2021 issue
pages 309-318 index UDK 336.22:336.14
DOI 10.31395/2415-8240-2021-99-2-309-318 (Link)
Abstract The functioning of the tax system of Ukraine is carried out simultaneously at two levels – state and local. It is on the second that taxes are regarded as a powerful and stable source of financial resources for the local finance system. However, a significant drawback is that the proceeds of funds are carried out mainly from the functioning of the folding national taxes. Such distribution of taxes does not contribute to strengthening the financial independence of local finances. In the system of local finance in Ukraine, the dominant position is occupied by local budgets. It is in them that resources are concentrated in the form of tax and non-tax revenues, income from capital transactions and intergovernmental transfers. The opposite are expense items, for the financing of which the income is collected. And, as the study showed, in 2019–2021, the available revenues could not cover the costs. As a consequence of the above, during the study period, a high proportion was observed relative to interbudgetary transfers, which confirms the high level of dependence of local finances on the resources of the highest level budgets. At the same time, a study of the coverage of the expenditure side by collected taxes, which go to local budgets, showed a slight, but persistent trend of their growth. In particular, taxes on income, profits and an increase in market value increased 24.8 % of the share – from 31 % in 2019 to 55.8 % in 2021 (10 months), and local taxes – only 9 % (from 12.5 in 2019 to 21.5 % in 2021). At the same time, in 2016–2020, the share of personal income tax increased by 3.4 %, and income tax – decreased by 1.5 %. A significant positive point was that part of the excise tax – on the sale of excisable goods by retail entities – was 100 % attributed to local budgets. But resource taxes and payments have recently shown gravitation in the state budget. The instability of tax revenues complicates the process of budget planning, and also reduces the level of financial independence of local finances, which requires the improvement of the system of its financial support.
Key words tax, tax system of Ukraine, local finances, local budgets, distribution of taxes between budgets
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