19:43 16.04.2024

Ministry of Finance refuses to equalize tax capacity of communities in 2025 based on population size

2 min read

The horizontal alignment of local budget tax capacity for 2025 will be based on forecast data from 2024. The calculation will rely on the expected revenue from corporate income tax and individual income tax in 2024, as stated by Denys Uliutyn, the First Deputy Minister of Finance.

"One of the parameters for horizontal alignment is the population size. Currently, we lack precise data. The population figures from the State Statistics Service are outdated and have not been updated since the beginning of the war. Some territorial communities do not fill out registries that provide comprehensive statistics on population numbers, while others, conversely, inflate these figures," the Ministry of Finance quoted Uliutyn during his online presentation of local finances.

Uliutyn emphasized the need to update the budget alignment formula to reflect new realities.

He noted that discrepancies involve more than 5 million people, with deviations exceeding 60% in some communities. Consequently, working with these databases for model calculations is challenging.

The Ministry of Finance is currently working on the Budget Declaration for 2025-2027, which will determine priorities for distributing budget resources, considering the country's military situation and recovery.

"It will include provisions on the relationship between the state budget and local budgets, particularly the indicators necessary for forecasting local budgets from 2025 to 2027," he said.

Uliutyn underscored that the Ministry of Finance plans to reintroduce medium-term budget planning at the local level. Currently, this legislative proposal has been approved by the government and is under consideration in the parliament.

The proposal includes the revival of norms for forecasting local budgets, regulation of local borrowing, provision of local guarantees, and clarification of the utilization of remaining funds from previous years' local budgets.