Evaluation of the effect of fiscal decentralization on the formation of local budgets of Ukraine

Modern transformational processes in Ukraine define new approaches to the formation of relationships in the system of state and local budgets. Reform of interbudgetary relations is an incentive for local communities to fill their estimates more efficiently, to switch to self-sufficiency and carefully plan their expenses. After fiscal decentralization in Ukraine, the role of revenues of local budgets in the redistribution of GDP has increased significantly. In 2016 it increased to 15.3%, compared with 14.8% in 2014. In 2017 the share reached the maximum value for the analyzed period and amounted to 16.8% indicating the development of fiscal decentralization. Incomes of local budgets in 2017 in comparison with 2014 have grown in 1,5 times. The financial basis for the exercise by local governments of their powers is tax revenues, their share in the structure of incomes of local budgets for the period under review is 81% or more. Tax revenues to local budgets in 2017 increased by 167.1% compared to 2014. The main sources, due to which the local budgets are being filled, are tax revenues. Significant changes occurred in their structure: the share of the tax on personal income decreased by 23 pp, but the share of local taxes and fees increased significantly by 19 pp. There is also a clear trend of growth in decentralization indicators. The share of local budgets in 2017 increased to 47.51% compared with 41.48% on average for 2010–2014. The share of own revenues of local budgets (excluding transfers) in revenues of the consolidated budget has not changed significantly, the average value for the analyzed period is 21.46%. After the expansion of the list of taxes credited to local budgets, the coefficient of decentralization of tax revenues in 2015 soared to 33.90%, but in 2017 it dropped to an average of 27.71%. After the decentralization reform, the index of financial dependence increased significantly – in 2015 it was 56.61%, in 2017 the value decreased to 49.91%, but the indicator remains at a high level. This indicates a high proportion of subventions from the state budget, and the strong dependence of local budgets on the state budget. Local budgets have a high share of official transfers in the total revenue structure, which indicates their lack of autonomy. So, the priorities for the formation of a strong financial base for the regions should be the search for additional sources of revenue generation in local budgets, the expansion of the revenue base of local budgets, and the improvement of redistribution processes in the budget system. Keywords: local budgets, decentralization, budget revenues, tax revenues, interbudgetary transfers, financial independence, intergovernmental fiscal relations, financial security