Decentralization in Ukraine is not standing still. This is evidenced by the package of draft laws to be considered by the Verkhovna Rada. What they relate to and what else is needed to improve the reform was the subject of the roundtable discussion “From the State to Prospects: Shaping the Legislative Agenda of Decentralization”.
Representatives of legislative and executive power, NGOs, industry experts and representatives of local governments and their associations assessed the state of decentralization and made proposals for relevant legislative initiatives.
DAI Vice President Richard Rapier recalled that the USAID HOVERLA Project has been working in the Verkhovna Rada since 2021 to shape the legislative agenda for the decentralization process. In 2024, 32 legislative acts were proposed, of which 6 were adopted.
When we evaluate this year’s achievements, it is also worth identifying priorities, which include updating the 2014 decentralization reform concept. Through dialogue platforms and engagement mechanisms, the USAID HOVERLA Project will continue to improve this reform, strengthening local self-government and community capacity,” Richard Rapier assured.
Members of the Verkhovna Rada Committee on State Power Organization, Local Self-Government, Regional Development, and Urban Planning participated in the Roundtable
Vitaliy Bezgin, Chairman of the Subcommittee on Administrative and Territorial Structure and Local Self-Government, called Ukraine a unique example of a state that, despite a full-scale war, continues reforms. At the same time, the people’s deputy urged state institutions to help communities more.
“If, on the one hand, we demand an increase in revenues to local budgets and increased transparency, then, just like the state, we should help all communities at least in such things as setting the boundaries of the land parcels, making land inventory and providing tools for data exchange as the first step to administering local taxes. The state should not generate a bunch of unnecessary and expensive documents and require communities to implement these documents on a mandatory basis from January 1, 2025, understanding that more than 90% of communities will not have these documents,” he said.
Larysa Bilozir, Head of the Subcommittee on Administrative Services and Administrative Procedures drew attention to the fact that local governments’ expectations of changes in tax administration coincide with the European Commission’s vision, which is reflected in the Enlargement Report. However, this movement is hindered by certain departmental resistance.
“We must say, and the European Commission clearly articulates this, that during the war, the parliament actually lost this communication with the government. There are no meetings that were there before. Ministers do not always attend the meetings of the committees. That is, this control function plus cooperation with the government on draft laws is slightly weakened, which leads to negative consequences. For example, the law on personal income tax and the law on taxes and local administration are actually blocked by the Ministry of Finance. In total, 14 draft laws on the distribution of personal income tax have been registered in the Verkhovna Rada, and each of them is better than the laws in force,” Larysa Bilozir noted.
Mykola Rubchak, Head of the Department for the Development of Local Self-Government, Territorial Organization of Power and Administrative-Territorial Structure of the Ministry of Development of Communities and Territories of Ukraine, spoke about what the government is working on.
“One of the key issues is the division of powers. How to divide them? According to what principles? What are delegated and what are transferred powers? How should they be financed? It is known that if the powers are not followed by resources, they are not executed,” the speaker said.
Among other things, Mykola Rubchak noted the draft law on renaming territorial communities. There are currently 30 communities in Ukraine that need to change their names. The corresponding legislative initiative has been developed, and in the near future the Cabinet of Ministers will submit it to the government for consideration.
“As for the reformatting of local administrations, I would like to inform you that the issue of adopting this bill is being considered with the participation of people’s deputies and experts. We have certain recommendations of the European Commission for this bill, and we are currently working with them. I think that some of these recommendations are technical in nature, and the issue will be resolved,” the ministry representative continued. During the discussion, many proposals were made by self-regulatory organizations. Executive Director of the Association of Cities of Ukraine Oleksandr Slobozhan called for a change in the personal income tax formula.
“On February 28, in conditions of war, the government automatically stopped the so-called withdrawal from local budgets. I had a discussion on that issue with the Minister of Finance. We cannot withdraw funds from Mariupol or Kharkiv that are continuously bombed,” he added.
Oleksandr Slobozhan also emphasized the importance of local statistics. The flows of people have changed. It is impossible to calculate the so-called reverse subsidy objectively without a proper statistical base.
“The most adequate solution would be to stop the withdrawal of the reverse subsidy and then switch to vertical horizontal alignment, which is in effect in other European countries, where the calculation is per capita. Let me remind you that in 2013, the level of subsidy budgets was 98%, and thus the Soviet principle ‘From each according to their abilities – to each according to their needs’ was followed. The current system of horizontal equalization has exhausted itself. We advocate that an appropriate fund for vertical equalization be created, and a certain percentage should be added per capita to each community that does not reach the conditional average, which would show the real work of the municipality.
