This was the topic of the info session that the team of the Regional Office of U-LEAD with Europe in the Cherkasy region recently organised for financial experts from the municipalities of the Cherkasy, Poltava, Sumy, Donetsk and Luhansk regions.

The event focused on the changes to the legislation regarding the indicators that affect local budgets in terms of the formation of the draft budget for 2023 and clarified the formation, review and publication of the draft local budget in wartime. This was reported by Serhii Slynko, Head of the Cherkasy Regional Office.

According to Mykola Hulko, Adviser on Municipal Finances and Management of the Regional Office, drafting local budgets for 2023 is one of the biggest challenges for municipalities. There are many factors that are currently preventing an accurate calculation of the municipality resources for a year ahead:

“For example, the single tax break from 1 April 2022 for individual entrepreneurs, single tax payers of Groups I and II. This tax break will remain in effect until the termination or lifting of martial law in Ukraine. Planning the single tax revenues from individual entrepreneurs of Groups I and II for the next year at the level of 2022 is risky because some individual entrepreneurs pay taxes, while some have taken advantage of the benefits provided by the government. And there is a big risk that individual entrepreneurs that paid taxes in 2022 may also take advantage of the opportunity not to pay a single tax. This, in turn, will reduce the revenues to the budget, and we will have to reduce the expenditures.”

Another factor to be taken into account when drafting a local budget is the changes to the Tax Code for municipalities that have been affected by the hostilities, namely that the land tax and rent for land are not accrued or paid.

“The list of the territories affected by the hostilities or temporarily occupied by the armed forces of the Russian Federation is determined by the Cabinet of Ministers. However, as of today, the list of territories where land fees (land tax and rent) are not accrued or paid and where hostilities are (were) being conducted is not yet available,” said Mykola Hulko.

During the event, a survey was conducted on expectations for meeting the local budget targets in 2023, which showed that 88% of respondents expect the budget targets to be the same or lower than in 2022.