Ukraine gov’t wants Kyiv city to pay more taxes to central budget

Ukraine’s Cabinet of Ministers is considering increasing to 75 percent from 50 percent the portion of personal income tax withheld by the central government that is collected by the Kyiv city (CITKIE) government, the Interfax-Ukrayina news agency reported on Dec. 10.



The proposal runs counter to current Kyiv Mayor Vitali Klitschko’s request for the right to retain all 100% of collected tax revenue for the city’s disposal. The same day, 65 out of 120 deputies of the Kyiv City Council signed an appeal to Ukraine’s Finance Ministry to allow the city government to retain 100% of the tax.



The personal income tax is the largest revenue source for the Kyiv city budget, even after half of the proceeds were redirected to Ukraine’s central budget in 2011. Net proceeds from this tax (UAH 7.6 bln in 2013) account for more than 40% of the city’s total budget revenue.



Roman Topolyuk: Hiking withholdings from the Kyiv government to 75%, once approved and implemented, would harm efforts to balance the city’s 2015 budget, with its UAH 1.7 bln deficit (as aestimated by the city administration). Full retention of the tax collected could have enabled the city to balance its budget, more or less, by our estimates. But recent statements from the Finance Ministry indicate it won’t be willing to offer concessions as the central government is aggressively working to fill its deficit.



The city also has the option of boosting its revenue from leasing activity (around UAH 1.9 bln). But even if these streams are doubled yoy in 2015, they will not cover the loss of the personal income tax. Taking into account the worsening macroeconomic and business conditions, we don’t believe the city could sustain itself financially without help from the central government. In the past, the central budget provided Kyiv with subsidies of above UAH 2 bln per year to cover its deficit, which could be possible next year.



Though debt servicing and repayment is among the priority expenditures for the Kyiv city government, as required by legislation, the outlook for smooth repayment of the city’s USD 250 mln Eurobonds in November 2015 is getting dimmer.

Источник: Конкорд Капитал