To identify fiscal federalism (FF) perspective idea adaptation in Ukraine and clarify financial decentralization (FD) peculiarities in implementing the budget policy of social-economic development of regions.
Background
Reformation of the local budget income and expenditure formation system is the most polemic question in the Ukraine since gaining independence. Diversification of financial obligations between budgets as well as challenges for the local authorities (LO) to increase the financial potential of the governed territories is vitally important. The outlined problems refer not only to the weakness of the LO’ financial potential but also to the fact that the local budget is being studied mostly as a financial plan of the LO’ incomes and expenditures.
Data Methods
The following methods will be applied: system, institutional, historical, dialectical, comparative, historical analysis, ratio and relative values analysis, trend analysis, and malleability analysis.
The information bases are legislative and standard regulations of the Parliament, and the Cabinet of Ministers of Ukraine and other bodies.
Results Expected results
Expenditures management shifts to LO who really get the power to act independently under FF. The inconsistency of regional development, artificial territorial separation, dividing the administrative-territorial units into extra-small parts, and the lack of LO’ responsibility for ineffective use of the sources of increasing the economic potential of the territories are an obstacle for Ukraine.
The reform of the administrative-territorial scheme including dividing the territory of the country into regions, based on merging the regions according to the economic regional plan, is an essential precondition for the development of FF in the Ukraine. It will ensure a reduction in disproportionality in regional development regarding budget expenditures per person, and create the preconditions for building up the necessary financial provision of the LO’ responsibilities.
Policy implications
Solving the existing problems of local budget formation demands the complete realization of the fiscal federalization principles in Ukraine. FF has nothing to do with territorial federalization but constitutes the diversification of competences between central and regional power bodies in the sphere of finance based on presuming the financial independence of regions. The risk of substitution of the ‘FD’ concept by the political and territorial decentralization definition grows in politically immature societies. This situation requires introduction of a special approach containing the information support of these processes.