Successes and failures of decentralization reforms in Ukraine

ivan sikora


Odesa, March 17, 2015 – Ivan Sikora, Director of Foundation “Open Society” held a briefing on the topic: “What kind of promise in the field of decentralization have forgotten the signatories of the coalition agreement?”.


Foundation “Open Society” the longest in Ukraine among analytical centers, monitors the promises of political forces. As a rule, the promises are general, vague, difficult to measure, which then allows them to freely interpret the results.


The last parliamentary company also did not differ from the previous one. Political forces have talked a lot about the decentralization and anti-corruption. Five of them signed a coalition agreement that fasten their promises during the election campaign. Foundation “Open Society” analyzed how correlated the coalition agreement and the promise of decentralization, which were given during the election campaign.


Decentralization reforms in the budget and fiscal policies, should lead to an increase in local revenues. They should grow in two or three times. The reform is already working, however, this increase revenues expected in the future.


The reform should lead to that increase independence of local budget and increase their revenue base. It should withdraw shadow income from areas such as rent and the allocation of land, property and trade.


All of this will happen if there will be political will at the local level. The reform should also increase the quality of utilities. Before that, they were a source of shadow operations. The reform should make them work for the benefit of bulk, rather than private interests involved in their work.


In addition to fiscal decentralization, this year will be provided administrative-territorial reform on decentralization. But it requires amending the Constitution of Ukraine.


Fiscal reform is to take place in the first quarter of 2015. Promised changes in the budget and tax codes already occurred. It has been the alignment of national and local income and not spending as before. Increased role of the public in making local budgets. Budgeting is now possible without control of the central authorities. But we should be able to use new opportunities, changes will not happen by themselves.


“Open Society” took the initiative “Bringing the billions in local budgets”. The possibility of decentralization reform it is necessary to use at the local level. “Open Society” is ready to help the local social workers.


But have not been able to reform the property tax in accordance with the European practice. It is now tied to the minimum wage. This applies not only to residential real estate, but also commercial. Given that rents are different in different cities. Therefore, the binding must go to the appraised value of the property. Proceeds from property and land – a very important source of revenue at the local level. Do not put the responsibility of the State Treasury for the delay in the implementation of prepay.


And about what is not satisfied – the income tax on individuals to be discharged into the local budget, where the person works. This is one of the main sources of income for local budgets. This tax – an indicator of how the city and its economy develop, evaluation of the effectiveness and capabilities of the city authorities, as they attract investment and create jobs.


Basic revenues to local budgets – a payment for land transport tax, fee for real estate and land. Land and property – one of the main points, where corruption is rampant in the region. Without deshadowing these moments will not be able to increase budget revenues.

It is important to develop a clear planning documentation. This will provide an opportunity to allocate land and to build on the basis of clear rules of the game. It will reduce the possibility of corruption and abuse at the local level, increase the cost of land, real estate and attract investment.


Administrative-territorial changes should already be set on the agenda of the Verkhovna Rada, as they were pledged to carry out this reform this year.


Politicians often promise much and perform little. It often happens in many countries, it is important that for failure of promises followedreckoning. Such politicians should lose votes and voters in the future.


We now live in a curved country, and it is unclear how it survived until now, and has come to this. Need clear rules of the game, and that they adhere to all the players. If the rules are not met, such a person or political force should drop out of political or legal field. Changes to the order of payment of personal income are very important and social activists will work with policymakers to ensure that they were adopted. Then there is a direct interest of local authorities in a fair and open policy.


Mass should be actively involved in decision-making (in the session of the Council committee meetings), to evaluate projects to be submitted to the session of local councils and commissions, articulate it in the media.


In fact in order to fiscal-budget decentralization reform work, a lot depends on social activists themselves.


They need to learn to understand and analyze the budget process, prepare draft decisions to carry out their advocacy to local MPs.


As for the land and property – the public should see how many pay rent, what mutual contributions, what about SAFs. To see how many of them and how much they pay taxes.


We need to look if there is, or there are no plans for areas and master plans, whether the areas are allocated in accordance with these documents.


It is necessary to analyze the city program. From them depends largely on how the budget is spent. This allows you to see who improved use of resources, and who manipulated them for political advantage or private gain.


Only after this increase in revenues of local budgets at times become a reality.