FINANCIAL CAPACITY OF TERRITORIAL COMMUNITIES IN THE EU MEMBER STATES

Abstract

This article is devoted to the theoretical and applied formation aspects of financially capable territorial communities in the EU member states. The parameters of the population size and density as well as the level of social infrastructure development are highlighted as the main determinants of the fiscal space design in the European Union member countries. It is proved that the model of social goods’ and services’ financing determines the level of fiscal decentralization. The experience of the European countries in the field of fiscal decentralization is analyzed and systematized. The regional taxation peculiarities are identified and justified. The consequences of the Great Recession for European fiscal space design are highlighted. The structure of the local budgets revenues in the EU member countries is examined. The fact that the local budgets revenues in the EU member states primarily include the taxes that have a significant impact on the business entities’ economic activity is revealed. The institutional restrictions for fiscal decentralization are identified. The role of geographical and territorial factors in the community’s financial capacity ensuring is investigated. The development of entrepreneurship is identified as a main driver for economic development and a source of the local budgets’ tax revenues. The local authorities’ fiscal powers are examined. Both local and shared taxes’ peculiarities are analyzed as well. The significance of periodic property taxes, e.g. the real estate taxes, in the local budget revenues’ structure is pointed out. It is proved that the fundamental changes in the land ownership models, and real estate market trends affect the real estate taxation mechanism’s transformation in the European Union. The property taxation experience in the EU is systematized. The role of the local taxes in the territorial communities’ social and economic development is argued. Both the advantages and disadvantages of property taxation in the European Union member states are determined. The directions for improving the local taxation mechanism are proposed.