Financial self-sufficiency of local budgets in the context of realization of financial decentralization reform

The article highlights the current state of the formation of local budgets in the context of decentralization of financial resources, taking into account the changes made to the budget and tax legislation, the analysis of the revenue and expenditure parts of the local budget is carried out. On the basis of the study, the problems and ways of strengthening the financial base of local self-government bodies have been identified. The main tasks of budget decentralization have been formulated. The sources of filling and problems in the field of formation of local budgets in Ukraine are indicated. According to the Strategic Action Plan of the Ministry of Finance of Ukraine for 2018–2021. the key priorities of Ukraine in the field of public finance management are the efficient execution of budgets and the optimization of resource allocation between the levels of the budgetary system. The fulfillment of these tasks is also the focus of the reform of financial decentralization, which began in Ukraine in 2015 and is aimed at strengthening the financial self-sufficiency of territorial communities. Over the first five years of the implementation of this reform, the share of local bud gets in the consolidated budget of Ukraine has increased from 18.5 % in 2015 to 23.3 % as of June 1, 2020, the share of local budgets' own revenues in GDP – from 5, 1 % to 6.7 % over the same period. However, despite certain positive developments, local budgets are still more than 46 % dependent on transfers from the state budget, which indicates the need for further transformation of the local finance system aimed at strengthening the independence and financial self-sufficiency of local budgets. At the same time, the revealed patterns also indicate the existence of problematic aspects in the formation of the revenue side of local budgets, which actualizes the need to revise the structure of local taxes and fees, as well as the powers of local governments in the field of their appointment, increase deductions from national taxes and fees to local budgets., and, at the same time, popularization of local borrowing and carrying out mass explanatory work on the organizational aspects of this process and optimizing the use of borrowed funds. These measures will increase the level of concentration of funds in local budgets and, accordingly, balance the processes of decentralization of income and expenditure, turning territorial communities into more independent and autonomous participants in budgetary and economic relations.

Impact of the tax system of Ukraine on the functioning of local finance

The functioning of the tax system of Ukraine is carried out simultaneously at two levels – state and local. It is on the second that taxes are regarded as a powerful and stable source of financial resources for the local finance system. However, a significant drawback is that the proceeds of funds are carried out mainly from the functioning of the folding national taxes. Such distribution of taxes does not contribute to strengthening the financial independence of local finances. In the system of local finance in Ukraine, the dominant position is occupied by local budgets. It is in them that resources are concentrated in the form of tax and non-tax revenues, income from capital transactions and intergovernmental transfers. The opposite are expense items, for the financing of which the income is collected. And, as the study showed, in 2019–2021, the available revenues could not cover the costs. As a consequence of the above, during the study period, a high proportion was observed relative to interbudgetary transfers, which confirms the high level of dependence of local finances on the resources of the highest level budgets. At the same time, a study of the coverage of the expenditure side by collected taxes, which go to local budgets, showed a slight, but persistent trend of their growth. In particular, taxes on income, profits and an increase in market value increased 24.8 % of the share – from 31 % in 2019 to 55.8 % in 2021 (10 months), and local taxes – only 9 % (from 12.5 in 2019 to 21.5 % in 2021). At the same time, in 2016–2020, the share of personal income tax increased by 3.4 %, and income tax – decreased by 1.5 %. A significant positive point was that part of the excise tax – on the sale of excisable goods by retail entities – was 100 % attributed to local budgets. But resource taxes and payments have recently shown gravitation in the state budget. The instability of tax revenues complicates the process of budget planning, and also reduces the level of financial independence of local finances, which requires the improvement of the system of its financial support.

Optimal Policies of Social Infrastructures Maintenance using Shock and Damage Model

Social infrastructures such as roads and bridges are indispensable for our lives. They have to be maintained continuously and such maintenance has become a big issue in Japan. Social infrastructures are maintained under strict restrictions such as decreasing in local finance revenue and scarcity of skilful engineers. Various kinds of factors such as inspection periods, maintenance costs, and degradation levels, are necessary to consider in establishing efficient maintenance plans of social infrastructures. Furthermore, the special circumstances of social infrastructures such as the delay of constructions which is caused by the scarcity of budget, must be discussed for the efficient maintenance plan. For such discussion, the stochastic cost model which contains preventive and corrective maintenances is useful. Although these models have been studied in mechanical and electronic systems, unique characteristics of social infrastructures such as their enormous scale and delays due to maintenance budget restrictions must be considered when such social infrastructure models are discussed. In this paper, we establish maintenance models of infrastructures which some of preventive maintenance must be prolonged. The expected maintenance cost rate is established using the cumulative damage model and optimal policies which minimizes them are considered. Three basic models and their extended models which consider natural disasters are discussed.

Analysis of Income Attribution of Consumption Tax in China’s Central and Local Government

After the policy to replace the business tax with a value-added tax was launched, local finance has encountered greater difficulties. In recent years, the economic downward pressure has made the dilemma far more serious. Some scholars, even from state level, showed some intentions of recommending that the consumption tax should be changed from the current central tax to a local tax or a shared tax to relieve the pressure of local governments. In this paper, we proved by presenting recent year’s tax figures of business, consumption, and local and central fiscals and their growth rate that replacing the consumption tax with a local tax does not exactly correspond to the trend of China’s reform of the financial system, the functional orientation of the consumption tax, and the nature of the consumption tax itself and may trigger some problems, and it may still be a better choice for the consumption tax to serve as a central tax.

FINANCE OF LOW-URBANIZED TERRITORIES AS AN INTEGRAL PART OF THE PUBLIC FINANCE SYSTEM

The article analyses the historical preconditions for the formation and development of local finances. Diverse directions of development of local finances in different countries, in different economic systems, are identified. The signs of public finances at the level of low-urbanized territories in modern conditions are formulated. it is proved that the formation of local finance subsystem as a component of public finance cannot be considered in isolation from the processes of formation of local self-government: the subjectivity of local authorities itself, whose decisions should have an overwhelming influence on the current socio-economic processes in a community and determine strategic priorities for its development, cannot be implemented without proper financial support.

ASSESSMENT OF REGIONAL BUDGET REVENUE GENERATION AND WAYS OF ITS GROWTH

The reasons for the constant attention to the problems of developing budgets at various levels are well known and understandable, since the budget is the basis of state, regional and local finance, it is the form of formation and spending of the cash fund intended for the financial provision of tasks and functions of state importance and local self-government. The relevance of the topic of the formation of regional budget revenues consists in the fact that such a budget is the main instrument aimed at regulating and stimulating the regional economy. Regional budget revenues are channeled to ensure economic, social and political development, it is therefore important to increase regional budget revenues. The purpose of the study is to identify the sources of the regional budget revenues. Methods of statistical analysis were used to reveal the research topic. The article analyzes the own incomes of the consolidated budget of the Chuvash Republic. Improving the efficiency of tax administration has a positive effect on the growth of the regional budget's own revenues. The article analyzes the dynamics and structure of regional budget revenues, provides actual data on budget revenues of the Chuvash Republic for several years. At the regional level, the generation of income has a number of problems associated with limited legal nature, as well as with the lack of own income to cover budget expenditures.

Economic activity vs generation of local budgets’ revenues: Regional disparities in COVID-19 instability

In the last two years, Ukraine and the world have been living in economic instability caused by the COVID-19 pandemic, which has fundamentally changed the trends in global and domestic economies, public and local finance. This study aims to estimate the trends of economic development of Ukrainian regions in the coronavirus crisis and their impact on the local budgets’ tax revenues generation. Main findings show the impact of the COVID-19 crisis on the development of Ukrainian regions is territorially differentiated. It is determined that in quarantine restrictions, the regions were developing under the impact of behavioral and institutional factors. Although a range of enterprises terminated their activities and there was a decline in income from business activities in 2020, the tax revenues of local budgets increased. The growth of tax revenues was accompanied by decreasing interbudgetary transfers and growing expenditures on containing the spread of pandemics and supporting healthcare. Reduced transfers to local budgets from the public budget affected the funding of investment programs of regional development. The abovementioned effects of falling business activity and consumer expenditures of the population along with falling investment can be considered the delayed effects of economic activity curtailment in the short-term period. An intensive increase of public investment that stipulates projects co-funding from budget funds and resources of businesses and establishment of cooperation between public, regional, and local levels of government should become among the primary steps to overcome the negative trends.

EXPENDITURE FLUCTUATION AND CONSUMPTION LOSS: RURAL SPATIAL POVERTY IN CHINA

Poverty is a challenge faced by all countries worldwide. This paper focuses on a factor that has been less well documented: the consumption loss of farmer households caused by the fluctuation of rural public expenditure. Based on large-scale micro household data and climate data, the instrumental variable estimation results show that every 1% fluctuation of rural public expenditure will lead to a 0.113% decrease in farm household consumption. In addition, the fluctuation of rural public expenditure is also a main cause of long-term consumption loss of farmer households. Furthermore, it was found that the impact of rural public expenditure fluctuation on consumption loss is of certain spatial heterogeneity. The worse the spatial environment is, the more serious the consumption loss will be. The policy suggestion of this paper is to ensure a stable scale of rural public expenditure through the central transfer payment, so as to improve the ability of local governments to implement counter cyclical public policies, and transform local finance (industrial investment) into public finance (infrastructure and education) to improve the local space environment. Overall, this study reveals the impact of spatial externality on rural poverty from the perspective of public expenditure fluctuation, and at the same time provides empirical evidence for a better evaluation of the relationship between development and poverty and support for rational regional anti-poverty policies.