Foreign Experiences of Budget Decentralization

Abstract

Administrative reforms in Ukraine focused on decentralization of governance system, change in the administrative and territorial system by consolidating communities and redistribution of authorities and financing sources at local governance level are expected to be implemented in keeping with European standards. The need to achieve positive dynamics of the economic system in Ukraine raises the importance of studies covering the array of problems related with the operation of local budgets, including European practices of local budget formation in the conditions of decentralization and their applicability for Ukraine. The purpose of the article is to investigate foreign practices of budget decentralization and their implementation perspectives in Ukraine. The essence of budget decentralization is highlighted; main indicators measuring budget decentralization and financial autonomy of local self-governance bodies are shown. As three models of local self-governance financing are distinguished by main criteria of financial decentralization (Scandinavian, Latin, and Hannover), peculiarities of the local budget formation in three countries belonging to the above models are analyzed: Finland (Scandinavian model), Spain (Latin model), and Poland (Hannover model). Results of the study show that while in countries of Scandinavian and Latin model taxation of consumption and residents’ incomes prevails, with fiscal importance of taxation of real estate, in countries of Hannover model taxation of consumption has minor significance.

Keywords

• budget decentralization, local budget revenues, local self-governance, local self-governance financing, taxation of consumption.