№ 1/2022

Fìnansi Ukr. 2022 (1): 27–49https://doi.org/10.33763/finukr2022.01.027

TAX POLICY

IEFYMENKO Tetiana ¹

¹SESE “Academy of Financial Management”
OrcID ID : https://orcid.org/0000-0002-9163-3959

Property taxation: background of fiscal decentralization in Ukraine

Fiscal decentralization has strengthened the capacity of governments to finance and provide public goods and services. Fulfillment of local government functions helps to balance the consumers’ individual preferences according to their needs. In Ukraine, each local authority should be entrusted with the management of the lands of relevant community in compliance with the principle of ubiquity as well as with the right to collect land tax. Local taxes on real estate and transport, typical for countries with capable local self-government, have also been introduced. Global challenges, international obligations, insufficient effectiveness of modern budgetary instruments of anti-crisis regulation make the improvement of property taxation necessary. Given new economic realities and the best world practice, it is necessary to reconsider the use of tools to support and stimulate regional development. The diversity of sources of payment and objects of taxation is one of essential problems in the collection of property tax. Its solution is the differentiated application of benefits, rates, deferrals, installments or to objects of taxation (according to the degree of participation of a property in the production process), or to entities (depending on their investment, social, environmental activity in the context of sustainable development). Such approaches are extremely important given the current trends of urbanization - their application will give the property tax an opportunity to perform the function of stimulating better use of funds and distribution of net income of enterprises and households in favor of budget revenues. Property taxes are progressive for those who have low incomes and can receive discounts when paying them. The spread of this approach during the post-crisis recovery of the national economy should be facilitated by the best practices of local authorities focused on the tax potential of SMBs. The main advantage of property taxes is a high degree of stability of the tax base. Further improvement of real estate taxation in Ukraine should focus on the prospects of its use in order to form stable sources of budget revenues and de-shadowing of property relations through the establishment of property owners. However, the risks of a low level of production incentives, as well as the understatement of the tax base through the transfer of property rights, still needs considering coordinated tax regimes for legal entities and individuals.

Keywords:fiscal decentralization, property taxation, local government bodies, tax on real estate different from land allotments, transport tax, payment for the land

JEL: H12, H21, H22, H27, H71

Iefymenko T. . Property taxation: background of fiscal decentralization in Ukraine / T. . Iefymenko // Фінанси України. - 2022. - № 1. - C. 27-49.

Article original in Ukrainian (pp. 27 - 49)

Download

Downloads :170

1. De Tocqueville, A. (1984). Democracy in America. New York: Penguin Books, USA Inc.
2. Tiebout, C. (1961). An Economic Theory of Fiscal Decentralization. In NBER, Public Finances, Needs, Sources and Utilization, pp. 79–96. Princeton: Princeton University Press. Retrieved from www.nber.org/system/files/chapters/c2273/c2273.pdf.
3. Tiebout, C. (1956). A Pure Theory of Local Expenditures. Journal of Political Economy, 64 (5), 416–424. doi.org/10.1086/257839
4. Hankla, Ch. R. (2009). When is Fiscal Decentralization Good for Governance? Publius, 39 (4), 632–650. doi.org/10.1093/publius/pjn034
5. Drucker, P. F. (2001). Management Challenges for the 21st Century. New York: Harper Business.
6. Treisman, D. (2006). Fiscal decentralization, governance, and economic performance: A reconsideration. Economics and Politics, 18 (2). doi.org/10.1111/j.1468-0343.2006.00169.x
7. Wollmann, H. (2011). Reorganizing Local Government: Between Territorial Consolidation and Two-tier Intermunicipality. Hrvatska i komparativna javna uprava: časopis za teoriju i praksu javne uprave, 11 (3), 681–706. Retrieved from hrcak.srce.hr/131904.
8. Danylyshyn, B. M.,& Pylypiv, V. V. Decentralization in the EU countries: lessons for Ukraine. Regional Economy, 1, 5–11. Retrieved from re.gov.ua/re201601/re201601_005_DanylyshynBM,PylypivVV.pdf.
9. Norton, A. (1991). Western European local government in comparative perspective. In Local Government in Europe: Trends and Developments, pp. 21–40. London: McMillan Press. doi.org/10.1007/978-1-349-21321-4_2
10. Oates, W. E. (1998). Federalism and Government Finance. In Oates, W. E. (Ed.). Economics of Fiscal Federalism and Local Finance. Cheltenham, U.K.: An Elgar Reference Collection.
11. Oates, W. E. (2011). Fiscal federalism. Edward Elgar Pub.
12. Oates, W. E. (2005). Towards a second generation theory of fiscal federalism. International Tax and Public Finance, 12 (4), 349–373. doi.org/10.1111/j.1468-0297.2010.02415.x
13. Arnold, J. M., Brys, B., Heady, Ch., Johansson, A., Schwellnus, C., & Vartia, L. (2011). Tax Policy for Economic Recovery and Growth. The Economic Journal, 121 (550), F59–F80. doi.org/10.1111/j.1468-0297.2010.02415.x
14. Brueckner, J. K., & Saavedra, L. A. (2001). Do Local Governments Engage in Strategic Property Tax Competition? National Tax Journal, 54 (2), 203–230. doi.org/10.17310/ntj.2001.2.02
15. Wallin, B., & Zabel, J. (2010, September). Property Tax Limitations and Local Fiscal Conditions: The Impact of Proposition 21⁄2 in Massachusetts. Lincoln Institute of Land Policy Working Paper. doi.org/10.1016/j.regsciurbeco.2011.03.008
16. Bird, R. M., & Oldman, O. (1990). Taxation in Developing Countries. Baltimore: Johns Hopkins University Press.
17. Zhalilo, Ya. A. (Ed.). (2020). Decentralization and formation of regional development policy in Ukraine (Scientific report). Kyiv: NISS. Retrieved from niss.gov.ua/sites/default/files/2020-09/decentralizatsiya-i-formuvannya-polityky-regionalnogo-rozvytku-v-ukraini_0.pdf [in Ukrainian].
18. Iefymenko, T., Gasanov, S., & Bartosh, S. (2020). Fiscal security and decentralization in the conditions of global challenges and threats. Finance of Ukraine, 9, 29–48 [in Ukrainian]. doi.org/10.33763/finukr2020.09.029
19. Cabinet of Ministers of Ukraine. (2013). On the Strategy for the Development of the Public Finance Management System (Decree No. 774-r, August 1). Retrieved from zakon.rada.gov.ua/laws/show/774-2013-%D1%80#Text [in Ukrainian].
20. Cabinet of Ministers of Ukraine. (2017). Strategy for reforming the public financial management system for 2017-2020 (Decree No. 142-r, February 8). Retrieved from zakon.rada.gov.ua/laws/show/142-2017-%D1%80#Text [in Ukrainian].
21. Cabinet of Ministers of Ukraine. (2021). On approval of the Strategy for reforming the public financial management system for 2022-2025 and the action plan for its implementation (Decree No. 1805-r, December 29). Retrieved from zakon.rada.gov.ua/laws/show/1805-2021-%D1%80#Text [in Ukrainian].
22. Verkhovna Rada of Ukraine. (1991). About the taxation system (Act No. 1251-XII, June 25). Retrieved from zakon.rada.gov.ua/laws/show/1251-12#Text [in Ukrainian].
23. Verkhovna Rada of Ukraine. (2014). On amendments to the Tax Code of Ukraine and some legislative acts of Ukraine on tax reform (Act No.71-VIII, December 28). Retrieved from zakon.rada.gov.ua/laws/show/71-19/ed20141228#Text [in Ukrainian].
24. State Treasury Service of Ukraine. (n. d.). Annual reports on the implementation of the State Budget of Ukraine. Retrieved from www.treasury.gov.ua/ua/file-storage/vikonannya-derzhavnogo-byudzhetu [in Ukrainian].
25. Walczak, J. (2018, April). Property Tax Limitation Regimes: a Primer. Fiscal Fact, 585. Retrieved from files.taxfoundation.org/20180423094817/Tax-Foundation-FF585.pdf.