Local communities need to enhance their efforts in collecting local taxes to increase their economic autonomy, a task set by the President of Ukraine, Volodymyr Zelensky, as reported by Viktor Mykyta, Deputy Head of the President's Office (OPO).
"The President has tasked us with optimizing the work of communities in tax collection: this includes land tax and all taxes collected locally. This is also a component of decentralization, where the head of the community will understand and plan tax collection for the city," he stated to the Interfax-Ukraine agency during the "Strategic Planning at the Regional Level: From Recovery to Development" forum in Kyiv this week.
According to Mykyta, who is responsible for regional policy and previously headed the Transcarpathian Regional State Administration since December 2021, not every community leader today understands that the economic autonomy of the community is their responsibility.
"They should not prioritize fighting for one grant or another but instead focus on creating jobs, as this is the primary source for budget replenishment. (In this case) they become self-sufficient," explained the Deputy Head of the OPO.
He emphasized the correctness of the decision to direct the so-called "military" tax on personal income (PIT) to the central budget. According to him, this has encouraged local councils and city mayors or heads of territorial communities to work on increasing their own revenues, yielding positive results.
"This forum clarifies for communities that, besides the military PIT, there are many other avenues for collection," added Mykyta.
As an example, the Deputy Head of the OPO mentioned the hotel tax. He stated that analytical data has shown that in areas like the mountainous Carpathians, this could become a significant source of budget replenishment, recalling the active chairman of the Yasinya territorial community.
Mykyta stressed the need to establish an honest dialogue with businesses, where in exchange for paying the hotel tax, the community improves infrastructure.
"This is a matter of conscience and honor, where businesses will understand that the head of the community is working for them. Then they will realize the need to pay more because the funds will be spent on tourist infrastructure: on trails, on roads, and on other amenities that will attract tourists," said the Deputy Head of the OPO, adding that this approach could also address the issue of hotel tax collection from homes.
As another example, he cited the Energy Help program launched during his tenure at the Transcarpathian RDA amid power outages, which returned all taxes paid to the local and regional budgets to businesses as compensation for purchasing generators, provided that all jobs were maintained for a year. Mykyta reminded that over 20 million UAH was paid within this program during the quarter.
He also noted that thanks to the relocation supported by regional and local authorities, budget payments from businesses in Transcarpathia increased by 67% in 2024 compared to 2023, even though there was growth the previous year.
"With a 12% inflation rate, this translates to 55%: businesses in Transcarpathia paid 55% more. This is about working with businesses. I always advocate for this philosophy - we cannot twist businesses' arms. It requires constant dialogue. Local authorities and government bodies must always take the first step. We need to demonstrate that we use your taxes solely for your benefit, then they will be motivated to pay more and increase turnover. Thus, there will be no need to raise tax rates at all," summarized Mykyta.
As reported by the Ministry of Finance, revenues to the general fund of local budgets for 2024 increased by 87.6 billion UAH, or 24.1%, reaching 451 billion UAH. The highest revenue growth was recorded in Kyiv (+36.8%) and in Mykolaiv (+29.5%), Transcarpathian (+27.5%), Kyiv (+27.2%), Volyn (+26.1%), and Vinnytsia (+25.1%) regions.
In another 11 regions, revenues increased by 20-25%: these include the remaining western regions, as well as Odesa, Chernihiv, and Sumy. In Zhytomyr, Poltava, Kharkiv, Dnipropetrovsk, Mykolaiv, and Kherson regions, revenues grew by 10-20%, in Donetsk by 4.9%, while in Luhansk, they decreased by 9.5%.
According to the Ministry of Finance, the main sources of revenue for the general fund of local budgets (excluding inter-budget transfers) in 2024 were: 257.5 billion UAH - personal income tax (PIT), 69.1 billion UAH - single tax, 39.3 billion UAH - land tax, 27.8 billion UAH - excise tax, 27.1 billion UAH - corporate profit tax from the private sector, and 10.7 billion UAH - tax on real estate.