The Ministry of Finance wants to take personal income tax from the military and law enforcement officers from the budgets of local communities. What consequences can this lead to?
This was reported by MAKSYM KOZYTSKY, head of the Lviv Regional Military Administration
Soon, the parliament will pass the state budget for the second time in the conditions of a full-scale war. Active preparation of the main financial document by which our country will live for the whole next year is taking place in all government offices.
The Ministry of Finance of Ukraine has proposed an innovation that will significantly worsen the state of local budgets. 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. All for the sake of strengthening the country’s defense capabilities.
Definitely a good intention! But did anyone calculate that such a decision could lead to fatal consequences for the life of territorial communities? Has anyone calculated the billions in aid that communities provide to the military?
For example, the regional and local budgets of the Lviv region for 8 months of this year have directed more than 3 billion hryvnias to support military formations and the needs of internally displaced persons.
Thus, Lviv Oblast – 1 billion 230 million UAH, local budgets of the region (Lviv, Yavoriv, Novoyavorivsk, Solonka, Chervonograd, Zolochiv, Sambir, Stryi) – 1.8 billion UAH. With these funds, the military units subsequently purchased the military support and equipment they needed.
Community leaders were caught off guard by the news about the Personal Income Tax, of course. It is not clear why it is necessary in such a difficult time to shake the foundation of every strong country – a financially capable and stable territorial community.
A question worth 100 billion. How can the central government limit local spending
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 calculations, thanks to this reform, which is called the most successful, the budgets of territorial communities collected from 5% to 120% more local taxes, and communities began to spend them on their own needs.
We have all seen how our villages and towns have changed. There was a motivation to work for the result, attracting new business, creating new jobs and, accordingly, increasing tax revenues.
About 60% of personal income is income from personal income tax. Money to local communities! Wasn’t this the slogan of decentralization? What awaits communities now? I will give some figures and examples from the near future life of Lviv Oblast.
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 worth emphasizing that these payments went to local budgets and to full-scale military operations, services were provided to servicemen and members of their families at their expense. The war in Ukraine has been going on since 2014!
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%.
By the way, every year the Lviv region asks the central authorities to take into account the indicators of the Kyiv city budget when calculating the amounts of basic and reverse subsidies in equalizing the financial capacity of local budgets. But in vain!
To understand the scale of the problem, it is necessary to find out what the alignment mechanism is. As a result of the implementation of the decentralization reform, local budgets began to receive directly more financial resources.
But despite this, some communities, due to objective reasons, cannot ensure the financing of their needs at the expense of the earned funds and need help. These are depressed areas, mountainous or sparsely populated territorial communities. Therefore, the state provided a mechanism that allows providing additional financial resources to such local budgets, i.e. horizontal equalization of tax capacity.
Its peculiarity is that the funds necessary for the budgets of “weaker” communities are obtained at the expense of the budgets of more “rich” communities. Equalization is carried out by withdrawing resources from richer local budgets to the state budget (reverse subsidy) to provide them in the form of a basic subsidy to poorer local budgets. That is, the mechanism already exists, and it has been successfully tested for years.
According to many experts, the exemption of the city of Kyiv (it has one of the richest budgets) from participating in the equalization of the financial capacity of local budgets violates the principles of unity and fairness of the budget system of Ukraine and leads to significant losses of the financial resources of the remaining territories in terms of basic and reverse subsidies.
Only this year’s losses of the Lviv region in connection with the above amount to more than 720 million hryvnias. It turns out that someone is equal, and someone is more equal.
The Ministry of Finance wants to take personal income tax from the military and law enforcement officers from the budgets of local communities. What consequences can this lead to?
This was reported by MAKSYM KOZYTSKY, head of the Lviv Regional Military Administration
Soon, the parliament will pass the state budget for the second time in the conditions of a full-scale war. Active preparation of the main financial document by which our country will live for the whole next year is taking place in all government offices.
The Ministry of Finance of Ukraine has proposed an innovation that will significantly worsen the state of local budgets. 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. All for the sake of strengthening the country’s defense capabilities.
Definitely a good intention! But did anyone calculate that such a decision could lead to fatal consequences for the life of territorial communities? Has anyone calculated the billions in aid that communities provide to the military?
For example, the regional and local budgets of the Lviv region for 8 months of this year have directed more than 3 billion hryvnias to support military formations and the needs of internally displaced persons.
Thus, Lviv Oblast – 1 billion 230 million UAH, local budgets of the region (Lviv, Yavoriv, Novoyavorivsk, Solonka, Chervonograd, Zolochiv, Sambir, Stryi) – 1.8 billion UAH. With these funds, the military units subsequently purchased the military support and equipment they needed.
Community leaders were caught off guard by the news about the Personal Income Tax, of course. It is not clear why it is necessary in such a difficult time to shake the foundation of every strong country – a financially capable and stable territorial community.
A question worth 100 billion. How can the central government limit local spending
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 calculations, thanks to this reform, which is called the most successful, the budgets of territorial communities collected from 5% to 120% more local taxes, and communities began to spend them on their own needs.
We have all seen how our villages and towns have changed. There was a motivation to work for the result, attracting new business, creating new jobs and, accordingly, increasing tax revenues.
About 60% of personal income is income from personal income tax. Money to local communities! Wasn’t this the slogan of decentralization? What awaits communities now? I will give some figures and examples from the near future life of Lviv Oblast.
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 worth emphasizing that these payments went to local budgets and to full-scale military operations, services were provided to servicemen and members of their families at their expense. The war in Ukraine has been going on since 2014!
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%.
By the way, every year the Lviv region asks the central authorities to take into account the indicators of the Kyiv city budget when calculating the amounts of basic and reverse subsidies in equalizing the financial capacity of local budgets. But in vain!
To understand the scale of the problem, it is necessary to find out what the alignment mechanism is. As a result of the implementation of the decentralization reform, local budgets began to receive directly more financial resources.
But despite this, some communities, due to objective reasons, cannot ensure the financing of their needs at the expense of the earned funds and need help. These are depressed areas, mountainous or sparsely populated territorial communities. Therefore, the state provided a mechanism that allows providing additional financial resources to such local budgets, i.e. horizontal equalization of tax capacity.
Its peculiarity is that the funds necessary for the budgets of “weaker” communities are obtained at the expense of the budgets of more “rich” communities. Equalization is carried out by withdrawing resources from richer local budgets to the state budget (reverse subsidy) to provide them in the form of a basic subsidy to poorer local budgets. That is, the mechanism already exists, and it has been successfully tested for years.
According to many experts, the exemption of the city of Kyiv (it has one of the richest budgets) from participating in the equalization of the financial capacity of local budgets violates the principles of unity and fairness of the budget system of Ukraine and leads to significant losses of the financial resources of the remaining territories in terms of basic and reverse subsidies.
Only this year’s losses of the Lviv region in connection with the above amount to more than 720 million hryvnias. It turns out that someone is equal, and someone is more equal.