The fiscal consolidation is a set of measures of the government’s financial policy aimed at reducing public debt and budget deficit. The policy of fiscal consolidation in Ukraine should be aimed at keeping the public debt not exceeding 60% of GDP (according to the Maastricht criteria) in order to implement effective fiscal decentralization simultaneously.
The policy of decentralization in Ukraine should be based not on the political decentralization (it is a way to federalization), but on the fiscal decentralization. However, it is important to develop a mechanism for the latter, so that it does not contradict the fiscal consolidation. We see this relationship in financing of a part of the public debt and the military expenses from the regional budgets.
The fiscal decentralization means the measures of the state on the redirection of the state taxes and spending to the level of regions and municipalities. Meanwhile, there is the emphasis on increasing the financial resources of the amalgamated local communities in Ukraine, leaving aside the financial interests of regional communities, generating centrifugal tendencies in the past (especially – in the South and the East of Ukraine).
To enhance the financial capacity of the regions of our country, the part of the VAT is offered to be secured on this level. The criterion for this tax redistribution between the center and the regions should be the percent of the each region population in the population of Ukraine: the higher percent of the population is, the larger share of the VAT a region should give to the budget. This share should be defined by the Parliament and the Government of Ukraine while preparing the draft state budget of the country, at the same time they should identify the list of additional expenses of the regions, including the repayment of public debt and military expenses (in proportion to the percent of population of the region in the population of our country).
Profit tax should be divided between the center and the regions at a ratio of 50% to 50%, while expanding the regional expenditure responsibilities, including the repayment of the part of the state debt of Ukraine and its military spending.
This approach to the implementation of public spending to pay for public debt and military spending (fiscal consolidation) and expansion the tax capabilities of the regions (fiscal decentralization) will allow putting the state revenues and expenditures under the strict control of local communities, thus reducing the centrifugal tendencies in Ukraine.Рубрика: Фінанси і банківська справа 

fiscal consolidation, fiscal decentralization, local government debt, value added tax, income tax, single social tax, excise tax, Ukraine, Greece, Poland, the European Union 

The article deals with the main disadvantages of the projects for reforming tax system of Ukraine, suggested by both the Ministry of Finance (project of N. Yaresko), and the Verkhovna Rada (project of N. Yuzhanina), because they emphasise the proportionality in taxation. The author substantiates the need for the progressive principle of taxation, including income tax through the use of three rates of value added tax (VAT) and two rates of corporate income tax (CIT). He also proves the need for a gradual reduction of the unified social contribution (Single Contribution) with a lag of five percent annually to 20%, so as not to cause crisis-filled state funds. The suggestions are based on the author’s research of taxation legislation in developed countries, which have long abandoned the flat tax as the income of individuals and legal entities. In addition, there is a requirement to use a few rates of value added tax in the EU, which is still not allowed in the analyzed projects. The main disadvantage of projects of Jaresko N. and Yuzhanina N. is orientation at neo-liberal values upon which the developed countries have begun to give up, moving to an economy built on a synthesis of liberalism and social democracy. In addition, these projects are aimed to improve the financial condition of primarily large enterprises (including foreign capital) while increasing the tax burden on small business and individuals. This redistribution of tax burden can cause social protest, so these projects should be improved by introducing the principle of progressivity in taxation, especially concerning personal income. The increase of tax burden on the income of wealthy people is necessary to be exercised not only by extending the lag between the income tax rates but by increasing indirect taxes on prestige goods and products related to leisure, tourism, entertainment and more. 

principle of fairness in taxation, progressivity in taxation, European Union, Slovakia, Ukraine, tax amnesty, Donbass, Small Tax Code 

The experience of some European Union countries of reducing differentiation in income between regions, mechanisms of redistribution of value added tax and other tax revenues between them is analyzed in the paper. The changes to the mechanism of redistribution of main budget-forming taxes between the Ukrainian regions are proposed on the basis of study of this experience. The aim of this redistribution is giving for the regions basic budget resources of the state and reducing the role of the center in their redistribution.

First of all it concerns the Value Added Tax (VAT), which is proposed to distribute between the center and the regions taking into consideration the number of population of each region of Ukraine. At the same time, leaving most of the VAT in the region, it is proposed to implement the VAT refund from local budgets.

The excess VAT revenue it is advisable to divide between the region and the center at a ratio of 50% to 50% to encourage the authority of the regions to its growth. At the same time to Corporate Income Tax (CIT) is advisable to apply another principle of redistribution to stimulate the regions of Ukraine to reduce its subsidiarity. Based on the suggestions of Mayors of the largest cities of Ukraine, it is should be left about 50% of the CIT on the places, but only if 50% of all their subsidies, subventions and grants also will be finance from their budgets.

It is advisable to completely leave the excess revenues from CIT in the region to encourage their leadership to create new industries and jobs in the regions, including the innovative direction.

In general, a new mechanism of redistribution of VAT and CIT should help to leave at least 60–70 % of tax payments in the region, but not 30 % as in 2013. Only the expansion of the financial ability of the regions, in this manner, can help to stop the centrifugal tendencies in Ukraine.

Without a doubt, proposed mechanism of VAT and CIT distribution will significantly rise the resources of local budgets, but it is the only way to interest the government of the regions to work more efficiently. In addition, the regions will be more effective to use the funds for grants, subventions and subsidies, as 50 % of them will be financed from the regional budget, which is better controlled by community.

It would be advisable to establish in Ukraine 6-9 of tax counties to reduce the “shadowing” in the process of VAT refunds and transformation of the State Tax Service into the independent, from the authorities of the region, structure. The similar already been done in Germany.

It would be advisable to conduct a tax amnesty to increase tax revenues that could be used to improve interbudgetary relations; but the cost from it, must be attributed to the local budgets, but not to the State Budget of Ukraine.

Today it is important give the basic financial resources on the level of regions, to stop centrifugal tendencies in our country, not on the level of local communities, as it is proposed by the new government of Ukraine, which was formed in early 2014. 

interbudgetary relations, region, taxes, value added tax, corporate income tax, excise tax, tax amnesty