№ 11/2015

Fìnansi Ukr. 2015 (11): 43–55

BUDGET POLICY

KUZKIN Yevhen ¹, SHYSHKO Oleksandr ²

¹State Agency of Motor Roads of Ukraine
OrcID ID : https://orcid.org/0000-0002-6790-8238
²State Educational and Research Organization “Academy of Financial Management”

Improvement of local government in modern conditions: core directions and overcoming obstacles

An important task of implementation of the fiscal decentralization reform in Ukraine is improvement of local finances and intergovernmental fiscal relations. Increased fiscal gap between expenditure needs and potential revenues is associated primarily with deepening the differentiation of revenue capacity of local governments. Within low mobility of tax bases (or practical absence of some of them) of fiscal instruments that are granted to local governments, reduced business activity leads to a significant increase in horizontal fiscal imbalances. The lack of an integrated approach to the revenue base of local budgets creates additional risks for financial autonomy of local governments. The emergence and deepening of the vertical fiscal imbalances primarily due to insufficiently substantiated algorithm of determination of expenditure needs of local governments and their priorities, as a result intergovernmental transfers tools are used incorrectly. Therefore, local authorities do not always have adequate incentives to provide adequate level of public services to residents who are permanent residents of the local community, and the local network of budgetary institutions cannot provide the necessary volume and quality of these services. Thus, the key financial challenge of powers by local authorities in Ukraine lies in insufficient own financial resources and limited opportunities for their effective spending.

Keywords:local budgets, intergovernmental fiscal relations, basic grant, reversible grant

JEL: H70, H72, H76, H77

Kuzkin Y. . Improvement of local government in modern conditions: core directions and overcoming obstacles / Y. . Kuzkin, O. . SHYSHKO // Фінанси України. - 2015. - № 11. - C. 43-55.

Article original in Ukrainian (pp. 43 - 55)

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