FEATURES OF THE MECHANISM OF FORMING LOCAL BUDGET REVENUES IN MARTIAL ARTS CONDITIONS

Abstract

The article is devoted to topical issues of the functioning of the mechanism for forming local budget revenues under martial law. The aim of the study is to identify the peculiarities of the mechanism for forming local budget revenues under martial law and to assess its changes under the influence of full-scale war. The study used official statistics from the Ministry of Finance of Ukraine, the Accounting Chamber of Ukraine, and the work of Ukrainian scientists. The positive effects of local government reform and the introduction of budget decentralisation have been identified, as the institutional and financial capacity of local government bodies has increased significantly since the start of the reform. The successful decentralisation reform, launched in 2014, has been a key factor in ensuring the resilience of local budgets to external threats associated with Russia's full-scale invasion. Analysis shows that since 2015, there has been a steady increase in the amounts flowing into local budget revenues. This trend has continued since the introduction of martial law in 2022, when the Ukrainian authorities promptly adopted the necessary amendments to regulatory and legal acts, which made it possible to take into account the specific features and needs of martial law when implementing budgetary policy at the local level. A study of the structure of local budget revenues showed that tax revenues account for the largest share of revenues. Among tax revenues, the most significant is personal income tax. The reasons for the growth in revenues from this tax are an increase in the monetary allowance for military personnel and an increase in 2022 in the rate of PIT allocation to local budgets to 64%. Revenues from other tax payments also increased: single tax on individuals, corporate income tax, property tax, excise tax. Inter-budgetary transfers from the state budget account for a significant share of local budget revenues. The largest transfers are educational subsidies, basic subsidies for horizontal equalisation of the tax capacity of territories, and subsidies to meet urgent needs under martial law. Local budgets also received additional subsidies related to the need to balance local budget imbalances that arose in connection with Russia's full-scale aggression. The study allows for a more accurate assessment of the dynamics and structure of local budget revenues, as well as their changes under martial law.