Financial decentralization in context of reforming inter-budgetary relations: quantitative dimensions and indicators

  • O. P. Slyusarchuk  PhD in Economics, Associate Professor of Economic policy and governance Department, Docent National Academy for Public Administration under the President of Ukraine http://orcid.org/0000-0002-3544-2402
  • N. S. Kryshtof  PhD in Public Administration, Associate Professor, Associate Professor of Economic policy and governance Department, National academy of public administration under the President of Ukraine http://orcid.org/0000-0003-2647-8996
  • I. I. Doronina  PhD in Economics, Doctoral Student of Economic policy and governance Department, National Academy for Public Administration under the President of Ukraine http://orcid.org/0000-0002-7032-644X
Keywords: financial decentralization, decentralization, inter-budgetary relations, local budgets, intergovernmental transfers.

Abstract

The article is devoted to financial decentralization processes development in Ukraine, actual problems and rating of local budget autonomy. The main issue facing local governments is the formation of a stable financial base to ensure their functions to meet the needs of society. The solution of this issue is possible only under the conditions of formation of the effective system of financial resources management, which would take into account the successful experience of financial decentralization of foreign countries. It is determined that local budgets play a key role in ensuring sustainable socio-economic development.
The aim of the article is to characterize the essence, purpose and consequences of financial decentralization, to evaluate its degree with the help of quantitative indicators, to analyze the local budgets sources of financial resources formation in the conditions of decentralization and to provide the general estimation of local budgets.
Scientific novelty. The state of financial decentralization is determined and the growth of financial autonomy of local budgets in Ukraine for the period 2017–2019 is revealed. An increase in the rate of transfers from local budgets to the State (reverse subsidy) indicates an increase in the revenue capacity of local budgets, and a decrease in the rate of transfers from the State budget to local (basic subsidies and subventions) indicates an increase in their independence.
Conclusions. Decentralization of government and financial powers of the state in favor of local self-government is one of the most decisive reforms since Ukrainian independence. The result of the reform was the rising interest of local governments in increasing revenues to local budgets, finding reserves to fill them, and improving the efficiency of tax and fee administration.
The state determines the model of interaction between central and local authorities. The optimal model is inter-budgetary relations, which foresees the level of fiscal independence of local governments providing the budget classification and implementation. The state is in the process of finding effective forms of interaction between state and local finances, which will guarantee the financial independence of local councils and the efficient use of finances.
Models of financial support of local self-government are determined. It was found that the ratio of local taxes to GDP in Ukraine is the Hanoverian model, where local taxes account for 1–2 % of GDP and about 4–5 % of all taxes.
Financial decentralization (as a process) is analyzed with the help of indicators, namely: the part of local expenditures in the consolidated budget expenditures; the part of local revenues in the consolidated budget revenues; the ratio of local budget expenditures to GDP; the part of local budget revenues in the total revenues of the consolidated budget; the part of intergovernmental transfers in local budget revenues; the ratio of local taxes to GDP.
For the successful implementation of the inter-budgetary relations reform in the context of decentralization, it is first of all necessary to ensure internal political stability, take into account the objective laws of social development and global trends in the world.

References

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Published
2021-02-24
How to Cite
Slyusarchuk , O., Kryshtof , N., & Doronina , I. (2021). Financial decentralization in context of reforming inter-budgetary relations: quantitative dimensions and indicators . Scientific Papers of the Legislation Institute of the Verkhovna Rada of Ukraine, (1), 143-154. https://doi.org/10.32886/instzak.2021.01.14