Tax reform at the local level – opportunities and threats

On August 15, 2012 at 12:00 in the Pure Policy Expert Club, which at Chernihiv, ul. Polubotok, 6-A, the final press conference “Tax reform at the local level-opportunities and threats” within the framework of the project “Local taxes: public monitoring of the impact of tax reform on financial independence of local budgets” was held. The Polissya Fund of International and Regional Studies organized the press conference. The event was supported by the International Renaissance Foundation.

The main purpose of the press conference was the presentation of the results of the project and expressing the opinions of experts on the further development of tax reform in Ukraine.

During the event, the President of the Polissya Fund Gennady Maxak told about the main implemented stages of the project:

1. Analysis of changes in tax legislation at national and local levels.

2. Conducting deep interviews with representatives of financial units of the authorities and self -government at the city level of Chernihiv, Chernihiv district and Chernihiv region.

3. Analysis of revenue parts of budgets of Chernihiv region, Chernihiv district and Chernihiv for the period 2009-2011.

4. Provision of recommendations to the authorities and self -government of local and state levels in order to increase the efficiency of tax policy.

Project manager Maxim Koryavets spoke about the reaction of the decisions of decisions regarding the recommendations provided. He noted that the list of state executive bodies and local self -government, which sent written answers to the given recommendations included: State Tax Service (DPS) of Ukraine, Chernihiv Regional Council and Financial Administration of Chernihiv City Council.

In particular, in a letter-answer from the first deputy head of the State Tax Service of Ukraine A.V. The chairman was provided with information on the work of the STS in the field of consulting and explanatory assistance for taxpayers. In particular, the work of the Information and Reference Department of the State Customs Service of Ukraine was emphasized, which provides information and reference services by phone, fax and e-mail.

In a more practical plane, local governments responded to the recommendations.

A letter from the deputy chairman of the Chernihiv Regional Council VV Melnychuk reported that the issue of evaluation of the effectiveness of local taxes and fees established at the present time will be included in the agenda at a meeting of the Permanent Commission of the Regional Council on Budget and Finance.

In turn, a letter from the head of financial management of Chernihiv city council V.E. Bystra was reported that the issue of evaluation of the efficiency of local taxes and fees established in Chernihiv will be considered at a meeting of the standing committee of the Chernihiv City Council on Socio-Economic Development, Finance and Budgets.

The project manager noted that the submission of recommendations for maintenance from the introduction from July 1, 2012 of the real estate tax other than the land plot sent to the Ministry of Finance of Ukraine could be one of the factors on the way to signing the President of Ukraine on June 22, 2012 of Law No. 4834-VI “On Amendments to the Tax Code. The law extends the moratorium on the introduction of real estate tax until January 1, 2013.

The project expert Maxim Zabashtansky provided a general assessment of the process of implementation of tax reform in the Chernihiv region and characterized the main obstacles to the improvement of tax legislation.

According to the expert, the most important positive point in the implementation of tax reform in Ukraine is the adoption of the Tax Code, which allowed to codify the tax legislation. Due to this:

-increased stability of the tax legislative framework as a whole;

-the legislative preconditions for improving the electronic system of tax administration have been created and the process of filing tax reporting has been simplified;

-a number of taxes and fees with low fiscal capacity and high administration costs have been canceled;

-the process of administration of tax payments is optimized by reducing their number;

-Prerequisites for increasing the transparency of business entities have been created.

However, according to the expert, the receipt of funds from local taxes and fees under the influence of tax reform has undergone minor changes in the direction of growth, but their share in the structure of local budget revenues remains very low, which causes significant financial dependence of local budgets on national sources.

Official transfers have a great share in the structure of revenues under study, which emphasizes the significant centralization of the distribution of budgetary financial resources, direct dependence on the State Budget of Ukraine and the low financial independence of local budgets.

The main reason for this state of affairs is the centralized budgetary and tax system of Ukraine, in which much of the tax revenues are directed to the State Budget of Ukraine.

The purpose of the project “Local Taxes: Public Monitoring of the Impact of Tax Reform on the Financial Independence of Local Budgets”, carried out by the Polissya Fund of International and Regional Studies with the support of the program of strengthening the impact of the Civil Society of the International Renaissance Foundation, is to evaluate the impact of tax reform in Ukraine on the role of local taxes.