Budget decentralization and its influence on the social and economic development of Ukrainian regions

Authors: M. Knir, PhD in Economics, Associate Prof., ORCID ID: 0000-0001-5591-2814; V. Delas, PhD in Economics, Associate Prof., ORCID ID: 0000-0002-9570-1875, Taras Shevchenko National University of Kyiv, Kyiv, Ukraine; N. Budnyk, expert, ORCID ID: 0000-0001-6139-5622, Ukrainian Laboratory of Quality and Safety of Agricultural Products, Kyiv, Ukraine

Annotation: The article generates the main results of the first stage of decentralization reform in Ukraine during the period from 2014 to 2018. The aim of the article is to analyze the process of decentralization in Ukraine, highlight the revenues and expenditures of local budgets and justify the need to create a development strategy for Amalgamated Territorial Communities (ATC). Considering the given indicators it is proved that the goal of ensuring financial autonomy and transparency of local authorities can be considered to be achieved. The interrelation of expansion of powers for local authorities and obtaining budgetary independence and increase of motivation to increase profitability is analysed. The development strategy for the Amalgamated Territorial Communities (ATC) is assessed. Proposals for increasing the capacity of the second stage of the reform are provided. The findings are useful for practitioners and researchers to gain knowledge on the practical issues and challenges of decentralization reform in Ukraine.

Key words: budget decentralization; amalgamated territorial communities; local governments; intergovernmental transfers; taxes; reform; local budget.

Recei ved: 17/07/ 2020
1st Revision: 03/08/2020
Accepted: 22/10/ 2020

DOI: https://doi.org/10.17721/1728-2667.2020/212-5/2


1. Bozhkova K. 2019. Community Development Strategy. Portal Decentralization https://decentralization.gov.ua/news/10947
2. Cheberyako O. 2019. Budget policy of Ukraine in the field of expenditures as a basis for promising economic development. Bulletin of the Taras Shevchenko National University of Kyiv. Economics. №5 (206). P.41-47. DOI: https://doi.org/10.17721/1728-2667.2019/206-5/6
3. Dollery, E. Brian, Drew, Joseph (2017) Chalk and Cheese: A Comparative Analysis of Local Government Reform Processes in New South Wales and Victoria. International Journal of Public Administration 41(1), 1-12. DOI: 10.1080/01900692.2017.1298609
4. Dynamics of unification of territorial communities of Ukraine. Ukrainian Center for Public Data. 2018. https://socialdata.org.ua/dinamika-obiednannya-teritorialnikh-g/
5. European Charter of Local Self-Government, ratified by the Law of Ukraine of July 15, 1997. № 52/97 http://zakon4.rada.gov.ua/laws/show/994_036
6. Financial decentralization in Ukraine. The first stage of success. Ministry of Regional Development, Construction and Housing of Ukraine http://old.decentralization.gov.ua/pics/attachments/Buklet_finansova_decenrt_(21.03.17).pdf
7. Hanzytska T. 2017. Local budgets in the context of financial decentralization. Scientific Bulletin of Kherson National University. Juridical sciences. №. 1. P. 22–26
8. Lyutyy I. 2018. Personal income taxation and local finances: contradictions and prospects for their solution. Bulletin of the Taras Shevchenko National University of Kyiv. Economics. №1 (196). P. 53-60. DOI: https://doi.org/10.17721/1728-2667.2018/196-1/8
9. Oates, Wallace E. 1972. Fiscal Federalism. New York: Harcourt Brace Jovanovich, pp.4-6
10. On Amendments to the Budget Code of Ukraine and Certain Legislative Acts of Ukraine Concerning Tax Reform: Law of Ukraine of December 24, 2015. №914-VIII http://zakon2.rada.gov.ua/laws/show/914-19
11. On Amendments to the Tax Code of Ukraine and Certain Legislative Acts of Ukraine Concerning Tax Reform: Law of Ukraine of December 28, 2014. №71-VIII http: // zakon.rada.gov.ua/go/71-19
12. On approval of the Concept of reforming local self-government and territorial organization of power in Ukraine. Order of the Cabinet of Ministers of Ukraine of April 1, 2014 №333-r http://zakon1.rada.gov.ua/laws/show/333-2014-р
13. Report on monitoring the process of decentralization of power and reform of local self-government as of December 10, 2019. Ministry of Development of Communities and Territories of Ukraine https://decentralization.gov.ua/uploads/library/file/506/10.12.2019.pdf
14. Report on the use of subventions received from the state budget by local budgets As of December 1, 2018. State Treasury Service of Ukraine https://www.treasury.gov.ua/ua/file-storage/2018-12
15. Shah, Anwar (2015) Taxing choices for economic growth with social justice and environmental protection in the people’s republic of China. Public Finance and Management 15(4), 351-380. https://www.researchgate.net/publication/287645974_TAXING_CHOICES_FOR_EC0NOMIC_GROWTH_WITH_SOCIAL_JUSTICE_AND_ENVIRONMENTAL_PROTECTION_IN_THE_PEOPLE’S_REPUBLIC_OF_CHINA
16. Sirik Z. 2018. Problems of cooperation of investment resources of territorial communities. Bulletin of Taras Shevchenko National University of Kyiv. Economics. №2 (197). P. 37-43. DOI: https://doi.org/10.17721/1728-2667.2018/197-2/6
17. Sokolova O. 2016. Theoretical principles of financial decentralization in the conditions of public administration reform. Visnyk of NAPA under the President of Ukraine. Series “Public Administration”. №4. Pp. 117-124
18. Strategy in the field of “Local Finance”. Association of Ukrainian Cities https://www.auc.org.ua/
19. The results of the first stage of decentralization in Ukraine in the period from 2014 to 2018. Portal Decentralization of Ukraine https://decentralization.gov.ua/about
20. Tiebout, M. Charles (1956) A Pure Theory of Local Expenditures. The Journal of Political Economy, Vol. 64, No. 5, pp. 416-424. https://fbaum.unc.edu/teaching/PLSC541_Fall08/tiebout_1956.pdf
21. Tiebout, M. Charles (1961) An Economic Theory of Fiscal Decentralization. Public Finances: Needs, Sources, and Utilization, pages 79-96. National Bureau of Economic Research, Inc.
22. Vasylenko D. 2015. Budget decentralization as a way to implement budget policy. Scientific blog. National University “Ostroh Academy” https://naub.oa.edu.ua/2015/
23. Vedel, Georges (1973) Administrative law in France. Translated by L. Etin. Moscow, Progress. – 512 p.
24. Werner, Jan (2008) Fiscal Equalisation among the states in Germany. RePEc. https://www.researchgate.net/publication/5164384_Fiscal_Equalisation_among_the_states_in_Germany
25. Wozniak G. 2017. Features of intergovernmental relations in the context of achieving the financial capacity of territorial communities. World of Finance. State and local finance. №2. P. 17–28