After long discussions, people’s deputies supported the second reading of the bill on the withdrawal of personal income tax from local budgets in favor of a special fund of the state budget. The relevant committee of the Rada assured that this would not harm the financial capabilities of the communities.
Despite the failure of the Verkhovna Rada in voting for project 10037 on the withdrawal of military personal income tax from community budgets, the relevant revenues were taken into account by the government when preparing the budget for the second reading, on which the Verkhovna Rada voted. 9 November. Focus writes about this in a new article: “Equipping soldiers, subsidies, shelters in hospitals: what the state will finance in 2024.”
According to the final draft estimate, part of the personal income tax was credited from taxation of income (“military” personal income tax) in the form of cash support, monetary awards and other payments received by military personnel, police officers and special and command personnel entirely to the special fund of the state budget. Such revenues will be distributed as follows:
- 45% – Administration of the Ukrainian State Service for the Protection of Private Communications and Information, for the implementation of measures purchase of special machinery and equipment;
- 45% – to the Ministry of Strategic Industries of Ukraine for the implementation of state target programs for the reform and development of the military-industrial complex, Development, mastery and application of new technologiesIncreasing existing production capacity for the manufacture of defense products;
- 10% – to the main managers of state budget funds related to the security and defense sector for further automatic allocation Military units of the Armed Forces of Ukraine, other military formations for logistical support proportional to the actual tax paid.
Some associations, local government representatives and experts opposed the withdrawal of income from the “military” personal income tax. In particular, according to the calculations of the Center for Economic Strategy, if local budgets do not impose a “war” personal income tax, the number of deficit budgets will increase from 227 to 543, of which 270 will have a deficit of more than 10. %. Interviewed Focus Experts have warned that if Initiative 10037 is passed, communities will be forced to cut development programs and there will not be enough funds to finance major repairs and prepare for winter.
MPs submitted 1641 amendments to the bill. As MP Yaroslav Zheleznyak wrote, “Such changes have zero chance of gaining votes in the chamber. It’s just a matter of stalling for time. Sometimes this helps to reduce votes later.” Daniil Getmantsev, chairman of the Committee on Finance, Taxation and Customs Policy of the Verkhovna Rada of Ukraine, stated that the adoption of this bill is a condition for voting on the draft 2024 budget in the second reading. Finally, lawmakers passed the bill on November 8 with 253 votes.
How does the government plan to compensate communities for the seizure of military personal income taxes?
The budget committee assures that communities will have no problems financing their expenses after the elimination of the military personal income tax. “We have identified compensatory mechanisms: additional subsidies will be given to communities most affected by the Russian occupation, and Wealthier communities will not remit the portion of their income that exceeds the national average back to the central level (this is a “reverse subsidy”). Additionally, communities will be able to use their remains for many purposes, but not for road construction or paving. “As of November 1, 2023, the free balance in community accounts amounts to almost UAH 207 billion,” he said. Focus Chairman of the Budget Committee of the Verkhovna Rada, Roksolana Pidlasa.
Next year’s draft state budget includes additional subsidies for communities most harmed by the Russian Federation’s military aggression
Thus, based on the results of finalizing the draft of the country’s main budget for the next year for the second reading, the Ministry of Finance increased the resource of local budgets by UAH 23,229 million, including:
- local budget revenues increased – 22,928.7 million UAH;
- transfers from the state budget to local budgets were increased – 300.3 million hryvnia.
According to the explanatory note to the draft 2024 budget for the second reading, changes on the revenue side of local budgets occurred due to the consideration of the aspect of personal income tax (except for the “military” personal income tax) of 4%. transition from state budget to local budgets and clarification of macroeconomic indicators of economic and social development of Ukraine.
Foresight was taken into account when determining the transfer volume New subsidy to ensure safe conditions in institutions health services – 1,000 million UAH; increase in educational subsidies – 275.3 million UAH. At the same time, the reverse subsidy in the amount of UAH 14,093.1 million in 2024 will not be transferred to the state budget.
Let us remind you that in the original version of bill No. 10037, it was proposed to distribute the revenues from the military personal income tax equally between the State Department of Special Communications and Information Protection and the Ministry of Strategic Industries. The funds were supposed to go to the production and purchase of equipment for the Armed Forces of Ukraine.
Moreover Focus He wrote that the idea of withdrawing personal income tax from military income arose after it became known that drums and vegetable cutters for shelters were purchased at high prices from local budgets. Misappropriation of funds was confirmed by a commodity inspection.
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