For 77% of respondents, losses to community budgets associated with limited powers in tax administration – survey
The limited powers of local governments in administering local taxes are leading to financial losses for local communities, according to the results of a study presented at the Interfax-Ukraine press center on Wednesday.
According to a survey conducted as part of the study "How limited tax administration powers affect community revenues," 77% of respondents confirmed that limited authority powers cause budget losses ("yes" – 33.3%, "mostly yes" – 43.7%). Specifically, 35.4% of respondents evaluated the estimated amount of lost revenue at 5-10%, another 18.8% believe the losses range from 10% to 20%, and 2.1% estimate them at more than 20%. At the same time, 29.2% of respondents noted that the extent of the losses is currently impossible to estimate.
Among the key administrative challenges, community representatives cited the inability to influence tax arrears and limited influence over determining the tax base. The main factors contributing to financial losses were incomplete real estate and land registers or databases (16.7%), lack of access to taxpayer information, their declarations, and salaries (14.6%), the presence of debtors (12.5%), and late or erroneous assessment and delivery of tax notification decisions by tax authorities (10.4%). Furthermore, 6.3% cited the problem of incorrect taxpayer registration, where a company operates in one community but pays taxes at its registered address in another.
In this regard, communities most lack access to tax registers (indicated by 81.3% of respondents), influence over the registration of taxpayers (56.3%), participation in work with tax debt (39.6%), tools for influencing large taxpayers (56.3%) and the right to independently initiate tax audits (37.5%).
The loss of these revenues directly impacts the livelihoods of communities. According to survey respondents, the areas losing funds include infrastructure (79.2%), social services (62.5%), education (43.8%), healthcare (41.7%), and business support programs (18.8%).
Despite existing challenges, local taxes play a significant role for most local communities: for 58.3% of respondents, their share of their own revenue (excluding transfers) exceeds 30%, and for 79.2% of respondents, these revenues have increased over the past two years. The most important taxes for their budgets are land tax (87.5%), the single tax (85.4%), and property tax (43.8%).
According to 25% of respondents, expanding access to registries and databases would most improve the financial viability of compulsory health insurance. Most communities also expressed their willingness to actively advocate for legislative changes: 22.9% are ready to join, and 39.6% would join, provided coordination is carried out through the Association of merged territorial communities.
The survey included specialists, primarily from the financial and economic sectors (65% of respondents' total positions). The sample was distributed by type of territorial community: rural communities made up 31.3%, village communities 29.2%, and urban communities 39.6%. By population size: 47.9% of the respondents were in communities with a population of 10,000 to 50,000, 41.7% were in communities with populations of up to 10,000, 8.3% were in communities with populations of 50,000 to 100,000, and 2.1% were in communities with populations of over 100,000.
