The Ministry of Finance of Ukraine has proposed an innovation that will significantly worsen the state of local budgets. About this stated Maksym Kozytskyi, head of the Lviv Regional Military Administration in his author’s column.
Thus, it is planned to completely withdraw from local communities the personal income tax (PIT) on the financial support of military personnel and law enforcement officers.
“It was the personal income tax that formed the lion’s share of the revenues of local budgets, in particular territorial communities. In recent years, one of the main elements of the decentralization reform has been implemented — strengthening the autonomy and financial independence of local self-government bodies. According to various estimates, thanks to this reform, which is called the most successful, the budgets of territorial communities collected from 5% to 120% more local taxes, and the communities began to spend them on their own needs.” — he wrote
According to him, for the Lviv region, the implementation of the proposed innovations will lead to a reduction in personal income tax revenues in the amount of 7.7 billion hryvnias.
“And this is a quarter of the revenues of the general fund of the regional budget. It is also planned to reduce by 4% the standard of personal income tax deduction to the budgets of territorial communities, which is about UAH 770 million. Therefore, the volume of all local budgets of the Lviv region will decrease by UAH 8.5 billion, or more than 20%.” he noted.
Kozytsky believes that if the state takes funds from local budgets, then it must also take over those institutions and institutions that were maintained by communities.
“Because after the withdrawal of personal income tax, they will not be able to finance them in the future. In the course of 2017-2023, the amount of additional subsidy decreased more than 5 times, and the amount of expenditures on transferred powers doubled.” he adds.
“Under the conditions of withdrawal from local budgets in 2024 of a significant financial resource in the form of personal income tax from the financial support of military personnel, a 4% reduction in the standard of deductions from personal income tax, 30% – the amount of the basic subsidy, as well as an increase in the wage fund by 15% – 16%, progressive inflationary processes — up to 12.5%, it will be absolutely necessary to increase the volume of additional subsidies by several times for the implementation of expenses transferred from the state budget for the maintenance of educational and health care institutions for local budgets.” – added the official.
According to his calculations, if the personal income tax of military personnel is taken away from the communities, the financial potential of local budgets of the region will decrease by a third next year.
“Already today, 72% of local budgets are allocated to wages, energy, social benefits, scholarships, medicine and food. And if we take into account the growth of the average salary in accordance with the growth of the salary of an employee (17.4%), prices and tariffs for energy carriers (12.5%), inflationary processes (10.8%), then local budgets will need about 4 0 billion UAH additionally. I am not talking about minimum development expenses, if most local budgets will not have the financial resources for priority expenses without the right to dispose of personal income tax,” — he emphasizes.
Earlier, the head of the Association of Cities of Ukraine, Oksana Prodan, criticized the Ministry of Finance’s initiative to withdraw 4% of personal income tax from local budgets.
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