Kyiv remains with a substantial surplus, even after the withdrawal of the “military” personal income tax

Kyiv will still have a lot of extra money even after the removal of the “military personal income tax”.

This was stated by Yurii Gaidai, senior economist at the Centre for Economic Strategy, during a discussion on draft law No. 10037, which provides for the redistribution of “military” personal income tax from local to state budgets (adopted in the second reading on 8 November – ed.).

Kyiv still has a significant surplus, even with the withdrawal of personal income tax. This is evidenced by data for 9 months of 2023.

According to the expert, among the top 20 surplus budgets, Kyiv generates most of the surplus at the local level despite having a smaller share of PIT in its distribution and not having a reverse subsidy.

In addition, the budgets of the Kyiv region, Odesa, Mariupol (due to a significant reduction in expenditures and the preservation of revenues from several large taxpayers) and Kharkiv are significantly surplus.

At the same time, the expert stressed that in the context of individual programmes of local budget expenditures, one can see programmes that can hardly be attributed to the top priorities during the war. Some show an abnormal increase in expenditures.

This includes the organisation of the improvement of settlements, which, compared to the first eight months of the respective year, has a nominal increase of 45% by 2021. Expenditures for the maintenance and development of roads are made from the local budget, as there are separate expenditures from the state budget. We also see a significant increase in contributions to the authorised capital of business entities. In 9 months, it is definitely more than it was in 2021 in nominal terms. There is also an increase compared to the previous year.

According to the expert, the comments of some representatives of local governments explain the increase in expenditures on improvement programmes and contributions of sufficient capital by the fact that there is a need to redirect funds from capital expenditure programmes for which payments are limited.

However, there are likely to be some inefficiencies in the budget policy in terms of determining eligible local budget expenditures and in implementing control.

Source: Ekonomichna Pravda