Fedo enko, Te iana
A icle
Tools o inancing local economic de elopmen o local
communi ies
Economic Fo um
P o ided in Coope a ion wi h:
Lu sk Na ional Technical Uni e si y
Sugges ed Ci a ion: Fedo enko, Te iana (2024) : Tools o inancing local economic de elopmen o
local communi ies, Economic Fo um, ISSN 2415-8224, Lu sk Na ional Technical Uni e si y, Lu sk,
Uk aine, Vol. 14, Iss. 1, pp. 62-74,
h ps://doi.o g/10.62763/cb/1.2024.62
This Ve sion is a ailable a :
h ps://hdl.handle.ne /10419/318684
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In oduc ion
The de elopmen o e i o ial and local communi ies is
one o he p io i y asks o bo h legisla i e and execu i e
au ho i ies o any coun y. This ask is ca ied ou wi hin he
amewo k o he implemen a ion o he goals o budge
and inancial decen alisa ion, which a e aimed a imp o -
ing he e iciency o edis ibu ing budge unds ecei ed
om axpaye s. As no ed by S. Tulumello e al. (2019),
Tools o inancing local economic de elopmen o local communi ies
Te iana Fedo enko*
Pos g adua e S uden
Mykolayi Na ional Ag a ian Uni e si y
54008, 9 Geo giy Gongadze S ., Mykolai , Uk aine
h ps://o cid.o g/0000-0001-5946-9493
Sugges ed Ci a ion:
Fedo enko, T. (2024). Tools o inancing local economic de elopmen o local communi ies. Economic Fo um, 14(1), 62-74.
doi:10.62763/cb/1.2024.62.
Copy igh © The Au ho (s). This is an open access a icle dis ibu ed unde he e ms o he
C ea i e Commons A ibu ion License 4.0 (h ps://c ea i ecommons.o g/licenses/by/4.0/)
*Co esponding au ho
Abs ac . The s udy examined he speci ic ea u es o using he ins umen s o inancing he economic de elopmen
o e i o ial communi ies on he example o Uk aine. Economic and s a is ical analysis me hods we e used o p ocess
he da a, including he Wilcoxon signed- ank es o compa ing g ow h ends. The s udy iden i ied he mos common
sou ces and ools o inancing he economic de elopmen o local communi ies, in pa icula ax e enues, g an s,
loans, public-p i a e pa ne ships. The inancial ins umen s o local economic de elopmen in he UK, Denma k,
and Slo enia we e analysed, ocusing on hei lexibili y, adap abili y, and e iciency. The impo ance o in eg a ing
he bes p ac ices o hese coun ies in o he s a egic inancial managemen o e i o ial communi ies o Uk aine
is subs an ia ed. Speci ic ecommenda ions o implemen ing success ul in e na ional expe ience a e p oposed. I
is ecommended ha Uk aine in oduce moni o ing and con ol sys ems simila o he B i ish ones o ensu e s ic
con ol o e local budge expendi u es, which is impo an o he s abili y and anspa ency o inancial go e nance;
consolida e o edis ibu e compe encies in a ou o la ge communi ies, inc ease he sha e o local axes, and
in oduce inancial equalisa ion mechanisms o educe inancial inequali y and ensu e equal oppo uni ies o all
communi ies, as he Danish expe ience has shown. Acco ding o he Slo enian expe ience, i is necessa y o de elop
clea s anda ds o he p o ision o se ices, c ea e independen supe iso y au ho i ies o moni o he e ec i eness
o local budge s, in oduce iscal decen alisa ion, and inc ease he sha e o local axes o inc ease he au onomy o
local au ho i ies and educe he dispa i y in he le el o se ices be ween egions. The esul s ob ained emphasised
he impo ance o using an in eg a ed and in eg a i e app oach o he de elopmen and managemen o inancing
ools o he local economic de elopmen o e i o ial communi ies. The p ac ical signi icance o he s udy’s indings
is mani es ed in he p o ision o speci ic ecommenda ions on he use o a ious inancing ins umen s, such as
local gua an ees, municipal bonds, and loans om in e na ional inancial ins i u ions and g an s om in e na ional
dono s. These ecommenda ions can help de e mine in es men p io i ies and imp o e in es men planning and
managemen p ocesses, which is impo an o he de elopmen o e i o ial communi ies
Keywo ds: egional public adminis a ion; ax e enues; g an s; sub en ions and subsidies; public-p i a e
pa ne ship; s a e budge ; local budge
ECONOMIC FORUM
Jou nal homepage: h ps://e- o um.com.ua/en
Vol. 14, No. 1, 2024, 62-74
A icle’s His o y: Recei ed: 17.08.2023 Re ised: 05.11.2023 Accep ed: 28.12.2023
UDC 332.1:336.6 DOI: 10.62763/cb/1.2024.62
local communi ies should become no only passi e e-
cipien s o s a e esou ces, bu also ac i e and espon-
sible pa icipan s in he de elopmen o hei e i o ies.
In he con ex o decen alisa ion, communi ies
ecei e mo e powe s and esou ces o independen ly
sol e local p oblems, which means ha hey mus no
only accep s a e sub en ions, bu also ac i ely a ac
Fedo enko
Economic Fo um, 2024, Vol. 14, No. 1
63
unde s anding hei inancial au onomy and abili y o
implemen economic de elopmen .
V. Mo e a(2021) conside ed he concep o e i-
o ial capi al as an impo an elemen o endogenous
economic de elopmen , and also emphasised he ole
o local esou ces and ins i u ional oppo uni ies in
s imula ing economic g ow h a he le el o local com-
muni ies. O.I.Laikoe al.(2023) analysed he o gani-
sa ional and economic p inciples ha ensu e he p es-
e a ion and sus ainable de elopmen o e i o ial
communi ies on he example o Kuialnyk Es ua y. The
s udy highligh ed he impo ance o sus ainable de el-
opmen and conse a ion o na u al esou ces in he
con ex o local economies.
R. Kos yuke ich e al. (2020) analysed he impac
o Eu opean in eg a ion p ocesses on he in es men
po en ial and ins i u ional ma u i y o u al communi-
ies. An impo an aspec o he s udy was he impac
o in e na ional in eg a ion on he de elopmen o lo-
cal economies and imp o ing he in es men clima e.
A.A onso & A.Venâncio(2019) examined he impac o
local go e nmen e o ms on he e ec i eness o e-
gional spending. The esea che s ound ou how chang-
es in he s uc u e o local sel -go e nmen can inc ease
he e iciency o using budge unds. This s udy p o id-
ed insigh in o how local go e nmen e o ms can a ec
inancial pe o mance a he local le el. K.Akapelwa &
A.Mwange(2023) conduc ed a e iew o local go e n-
men unding heo ies, which is impo an o unde -
s anding di e en app oaches o ensu ing he inancial
sus ainabili y o communi ies.
Gaps in he esea ch o inancial suppo and man-
agemen o e i o ial communi ies a e mani es ed
in he insu icien adap a ion o heo e ical models o
inancing o eal condi ions and dynamic changes in
he inancial en i onmen , supplemen ed wi h speci ic
examples o he applica ion o iscal ins umen s and
me hodologies in a ious egional con ex s. In addi-
ion, speci ic s a egies o managing he de elopmen
o local communi ies emain insu icien ly in es iga ed,
which indica es he need o in eg a e new app oaches
and conside local eali ies in hei implemen a ion.
The pu pose o he s udy was o highligh he spe-
ci ic ea u es o using inancing echnologies in he sys-
em o socio-economic de elopmen o e i o ial com-
muni ies in Uk aine. To achie e his goal, he ollowing
asks we e se :
1.To iden i y he mos common sou ces and ools
o inancing he economic de elopmen o local com-
muni ies.
2.To analyse ools o inancing local economic de-
elopmen o local communi ies in he UK, Denma k,
and Slo enia.
3.To de elop ecommenda ions o implemen ing
he success ul expe ience o coun ies in imp o ing he
use o ools o inancing local economic de elopmen o
e i o ial communi ies o Uk aine.
a ious inancial ins umen s o he implemen a ion
o economic de elopmen p ojec s. I is inancial ins u-
men s ha can p o ide he necessa y le el o inancial
suppo o he implemen a ion o ambi ious p ojec s
aimed a imp o ing in as uc u e, imp o ing he s and-
a d o li ing o esiden s and he o e all economic de el-
opmen o e i o ies (An unesJ .e al.,2021).
The use o inancial ins umen s equi es commu-
ni ies no only o be p oac i e, bu also o ha e a high
le el o inancial li e acy and he abili y o manage deb
obliga ions (Pu a & Iswan o, 2024). Unlike g an s, i-
nancial ins umen s p o ide o a e u n on in es ed
unds, which imposes addi ional esponsibili y on com-
muni ies o he e icien use o hese esou ces. The e-
o e, o he success ul implemen a ion o de elopmen
p ojec s, i is necessa y no only o ecei e unding, bu
also o ensu e e ec i e planning and managemen o
inancial esou ces.
Di e en coun ies ha e hei own unique expe ience
in using ools o inance local economic de elopmen ,
which e lec s he speci ics o hei economic, poli ical,
and social condi ions. In he UK, he applica ion o local
axes and in es men s a egies has e ec i ely ensu ed
inancial s abili y and suppo o egional de elopmen .
In a Scandina ian coun y such as Denma k, high e icien-
cy in managing he inancial esou ces o local go e n-
men s has been achie ed h ough decen alisa ion and
cos op imisa ion, which has con ibu ed o economic
g ow h and social equali y (Kjae ,2021). In Slo enia, he
emphasis on iscal ins umen s o suppo sus ainable
egional de elopmen has helped o educe social and
economic inequali y by ensu ing sus ainable g ow h o
local communi ies (Minis y o Finance o he Republic o
Slo enia,2024). Thus, hese examples demons a e he
di e si y o app oaches o he use o local de elopmen
inancing ins umen s, emphasising he impo ance o
adap ing inancial ins umen s o local condi ions and
needs. The use o in e na ional expe ience equi es
conside a ion o he cha ac e is ics and capabili ies
o each coun y, which allows c ea ing mo e e ec i e
and sus ainable models o managing local inances.
As no ed by Y. Guane al.(2024), despi e he exis -
ing expe ience o using inancial ins umen s o s im-
ula e he de elopmen o local communi ies, s a e ex-
ecu i e bodies and local go e nmen s s ill ace many
di icul ies in i s unde s anding and e ec i e use. Con-
sequen ly, inancial ins umen s emain an impo an
elemen in he implemen a ion o a ious local commu-
ni y de elopmen p ojec s. The analysis o publica ions
in he ield o inancing he economic de elopmen o
local communi ies e ealed a numbe o main a eas.
Local communi ies as subjec s o local sel -go e n-
men . V.Radich & O.B ygine s(2020) explo ed he ole
o e i o ial communi ies as p ima y subjec s o local
sel -go e nmen , whe e hey emphasise he impo -
ance o communi ies as he main pa icipan s in lo-
cal sel -go e nmen p ocesses, which is impo an o
Tools o inancing local economic de elopmen ...
Economic Fo um, 2024, Vol. 14, No. 1
64
Ma e ials and Me hods
The s udy sys ema ised in o ma ion abou a ailable
inancial ins umen s ha a e mos o en used in he
p ac ice o e i o ial o local communi ies. The Uni ed
Kingdom, Denma k, and Slo enia we e chosen o ex-
amine he economic de elopmen o local communi ies
o he ollowing easons. The UK is cha ac e ised by a
long his o y o decen alised go e nance and ex ensi e
use o inancial ins umen s o suppo local commu-
ni ies. Denma k demons a es a success ul model o a
social s a e and a high le el o local au onomy, which
ensu es he e ec i e use o inancial ins umen s o
economic de elopmen . Slo enia is ep esen ed as
a cen al and Eas e n Eu opean coun y ha has im-
plemen ed signi ican local go e nmen e o ms since
joining he Eu opean Union.
To in es iga e he inancial ins umen s o local com-
muni ies in he UK, s a is ics on local communi y income
o 2017-2022 we e collec ed (Depa men o Le elling
Up, Housing and Communi ies,2023). This da a includ-
ed in o ma ion on g an income and local communi ies’
own income, exp essed in millions o pounds. Da a col-
lec ion was ca ied ou om o icial sou ces such as go -
e nmen epo s, na ional s a is ical se ices and inan-
cial epo s o local councils, in pa icula , Wo ldwide Tax
Summa ies(2024); Minis y o Finance o he Republic
o Slo enia(2024); O ganisa ion o Economic Co-ope a-
ion and De elopmen (2021). The sou ces o he Depa -
men o Le elling Up, Housing and Communi ies(2023)
and he da a o he Decen alisa ion Re o m(2014) by
he Go e nmen Po al o Uk aine we e also conside ed.
The da a was o de ed and sys ema ised o u he anal-
ysis. An economic and s a is ical analysis was ca ied ou
using he Wilcoxon signed- ank es , which was used o
compa e income le els and analyse hei changes o e
ime, which helped o de e mine ends and pa e ns in
he inancing o local communi ies. Nex , g aphical mod-
els we e buil ha illus a ed changes in g an e enues
and local communi ies’ own incomes o 2017-2022. In
addi ion, a co ela ion analysis was ca ied ou o de-
e mine he ela ionships be ween di e en sou ces o
income o local communi ies and hei impac on he
o e all le el o economic de elopmen .
Fu he , he ools o inancing he economic de el-
opmen o local sel -go e nmen we e s udied on he
example o Denma k. Fo his pu pose, s a is ical da a
on he numbe o local communi ies we e collec ed
and a map was buil ha allowed isualising he esul s
o he e o ms ca ied ou in Denma k and e lec ed
changes in he adminis a i e and e i o ial s uc u e o
he coun y caused by e o ms aimed a op imising and
enla ging communi ies.
To analyse he sou ces o unding o local com-
muni ies in Slo enia o he pe iod 2018-2023, he
ime se ies analysis me hod was used, which allowed
s udying he dynamics o changes in inancial e e-
nues, iden i ying seasonal luc ua ions and ends, and
p edic ing u u e alues based on a ailable da a. Da a
o analysis we e collec ed om o icial sou ces, such
as na ional s a is ical se ices and local council inan-
cial epo s (Minis y o Finance o he Republic o Slo-
enia, 2024). The s a is ics included in o ma ion on
local axes, go e nmen subsidies, g an s om he Eu-
opean Union, and o he inancial e enues exp essed
in millions o EUR. A he inal s age, he s uc u e o lo-
cal budge e enues o Uk aine o he pe iod om Jan-
ua y 1,2024 o Ap il 4,2024 was analysed (Decen al-
isa ion,2024). Based on he esul s o esea ch on he
expe ience o G ea B i ain, Denma k, and Slo enia, a
numbe o ecommenda ions we e c ea ed o imple-
men ing hei expe ience in he p ac ice o Uk ainian
e i o ial communi ies.
Resul s
Sou ces and ins umen s o inancing he economic
de elopmen o local communi ies
The main ins umen s and sou ces o inancing a e ax
e enues, which include local axes such as p ope y ax,
co po a e income ax, and land ax. I is wo h no ing ha
such ax e enues p o ide he main inancial esou ce
o he implemen a ion o local p ojec s and co e he
cos s o social se ices and in as uc u e. Non- ax e e-
nues, such as se ice ees, ines, and en al income om
public p ope y, while less signi ican , a e also impo an
o he inancial s abili y o he communi y.
Capi al e enues gene a ed om he sale o lease o
capi al asse s can be used o inance la ge in as uc u e
p ojec s o eplenish ese e unds. Communi ies also
o en ecei e inancial assis ance in he o m o g an s
and dona ions om na ional and in e na ional o gani-
sa ions, which con ibu es o he implemen a ion o spe-
ci ic de elopmen p ojec s. T ans e e enues, including
subsidies and sub en ions om he s a e budge , help
equalise inancial oppo uni ies be ween e i o ies and
co e local budge de ici s.
I is also wo h adding ha local communi ies can
a ac loans and bo owings om comme cial banks
o h ough bond issues o inance la ge p ojec s, bu
his equi es ca e ul deb managemen . Public-p i a e
pa ne ships allow he p i a e sec o o be in ol ed in
he implemen a ion o in as uc u e p ojec s, which e-
duces he inancial bu den on local budge s. In es men
unds can p o ide capi al o long- e m de elopmen
p ojec s, while c owd unding and local ini ia i es allow
a ac ing esou ces om esiden s and businesses o
inance local p ojec s.
In gene al, he e ec i e use o hese sou ces and in-
s umen s o inancing is impo an o ensu ing he sus-
ainable economic de elopmen o local communi ies.
The de elopmen and implemen a ion o new inancial
ins umen s, such as public-p i a e pa ne ships and
c owd unding, can signi ican ly imp o e and inno a e
he inancial si ua ion and con ibu e o he implemen-
a ion o impo an ini ia i es.
Fedo enko
Economic Fo um, 2024, Vol. 14, No. 1
65
Fea u es o inancing local economic de elopmen
o local communi ies: in e na ional expe ience
Success ul inancing o he economic de elopmen o
e i o ial communi ies is a signi ican ac o o ensu -
ing hei sus ainable g ow h and imp o ing he quali y o
li e o he popula ion. In e na ional expe ience demon-
s a es a a ie y o app oaches and s a egies ha can
p o ide aluable lessons o imp o ing inancial mecha-
nisms a he local le el.
The UK has a complex h ee- ie sys em o local go -
e nmen ha includes coun ies and dis ic s. Regions
ha e e y limi ed unc ions and a e no conside ed local
go e nmen s o unding pu poses. The main le els o
local go e nmen a e coun ies and dis ic s. The e a e
89 coun ies ha a e di ided in o se e al ypes, each o
which has i s own cha ac e is ics. London has a unique
go e nance sys em – he G ea e London Au ho i y
(GLA), which includes he elec ed London Assembly and
he Mayo o London. London is di ided in o 32 pa s
and a sepa a e uni – he Ci y o London. O he coun-
ies in England include me opoli an coun ies, whe e
adminis a i e uni s co e majo ci ies and p o ide se -
ices h ough dis ic s, uni ied adminis a i e bodies
ha combine he unc ions o coun ies and dis ic s, and
wo- ie non-conglome a e coun ies, whe e coun ies
p o ide basic se ices and dis ic s ha e a limi ed ole
(He czyński,2019).
Local go e nmen s in he UK ecei e income mainly
om wo sou ces: g an s and hei own income. G an s
a e di ided in o se e al ca ego ies. An Income Suppo
G an is an equalisa ion g an used o gene al ex-
penses, and i s dis ibu ion is de e mined by a o mu-
la ha akes in o accoun local income, se ice cos s,
and demog aphic da a. This g an is adjus ed annually
depending on inancial calcula ions. Ta ge ed g an s
unde o ganised ex e nal unding include a numbe o
specialised g an s, such as an Educa ion G an (72% o
he AEF) and a Heal h G an (9%). The e is also a Police
Suppo G an , which is used o und local police o ces
and is pa ially supplemen ed by council ax e enue.
Agg ega e Ex e nal Finance (AEF) is an agg ega e indi-
ca o used in he local go e nmen inancing sys em in
England. I includes all o ms o g an e enue om he
cen al go e nmen ha a e no pa o egula ans-
e s and ha local au ho i ies can use o inance hei
expenses. I is wo h no ing ha he AEF in England co -
e s se e al ypes o g an s, in pa icula : a g an aimed
a inancing educa ion, a g an o inance public heal h,
a g an o suppo s uden s om low-income amilies,
a g an p o ided o encou age he cons uc ion o new
housing uni s (O ganisa ion o Economic Co-ope a ion
and De elopmen ,2021).
Table 1 demons a es he dynamics o local com-
muni y incomes in he UK o 2017-2022, di ided in o
g an and own e enues. G an e enues we e ma ked
by luc ua ions, wi h he highes a es du ing he COV-
ID-19 pandemic due o addi ional g an s, bu gene ally
showed a downwa d end. Communi ies’ own e enues
also changed, wi h some g ow h a he beginning o he
pe iod and a subsequen sligh dec ease.
Table 1. Income o local communi ies in he UK o 2017-2022, million GBP
Income ca ego y 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022
G an s
Re enue Suppo G an 4.383 1.493 700 1.657 1.629
Police Suppo G an 7.838 7.713 7.669 7.987 8.228
AEF 43.333 42.81 42.656 51.215 50.333
G an o suppo local
se ices 39 24 30 22 28
COVID-19 gene al and
e enue g an s - - - 6.622 2.871
G an s ou side he AEF 22.562 20.704 18.007 16.879 15.293
G an s o he housing
income accoun 159 207 191 236 198
Capi al expendi u e g an s 8.934 9.867 8.702 9.262 10.195
To al g an e enue 87.249 82.817 77.955 93.879 88.775
Own e enue
Municipal ax 30.454 32.001 33.183 34.04 34.434
Re enue om he bid
e en ion scheme 16.707 19.454 18.163 17.323 17.695
Ex e nal in e es income 1.288 1.631 1.781 1.522 1.611
Capi al eceip s 3.051 3.421 2.358 2.105 2.364
Sales, ees, and cha ges 14.028 14.268 14.056 11.426 13.832
Ren o councils 7.724 7.744 7.543 7.426 7.087
O he income and
adjus men s 20.911 20.648 20.925 21.321 21.238
To al own income 73.252 78.52 77.084 73.842 77.023
To al e enue 181.411 181.985 175.964 189.042 187.036
Sou ce: compiled by he au ho based on Depa men o Le elling Up, Housing and Communi ies(2023)
Tools o inancing local economic de elopmen ...
Economic Fo um, 2024, Vol. 14, No. 1
66
The UK’s own income includes e enues om
local axes, in pa icula he comme cial eal es a e
ax, pa o which emains in local budge s. In addi-
ion, he e a e g an s ou side he AEF ha a ge he
managemen o speci ic se ices, such as housing as-
sis ance, which is adminis e ed by hi d-pa y o gani-
sa ions h ough subsidies om he Minis y o Labou
and Pensions (Fig.1).
Figu e 2. Map o Denma k aking
in o conside a ion he implemen a ion o s uc u al e o m
(a) be o e 2007 and (b) a e 2007
Sou ce: compiled by he au ho based on U. Kjae (2021)
Figu e 1. G an e enue and own e enue o local communi ies in he UK, million GBP o 2017-2022
Sou ce: compiled by he au ho based on Depa men o Le elling Up, Housing and Communi ies(2023)
87.249 82.817 77.955
93.879
88.775
73.252 78.52 77.084 73.842 77.023
181.411 181.985
175.964
189.042 187.036
165
170
175
180
185
190
195
0
10
20
30
40
50
60
70
80
90
100
2017-2018 2018-2019 2019-2020 2020-2021 2021-2022
G an e enue Own e enue To al e enue
The able o local communi y incomes o 2017-
2022 showed impo an ends in inancing. To al g an
income has ce ain luc ua ions, wi h a dec ease in he
pe iod in 2019-2020 and an inc ease in 2020-2021. AEF
g an s showed s eady g ow h om 49.66% in 2017-2018
o 56.85% in 2021-2022, indica ing ha local go e n-
men s a e inc easingly elying on hese g an s o inance
hei needs, which can be bo h posi i e (inc eased e-
sou ces o impo an p ojec s) and nega i e (depend-
ence on uns able sou ces o unding). Own e enues also
showed in e es ing ends. The municipal ax inc eased
h oughou he pe iod, om 16.78% o 18.43%, which
indica es a s able le el o ax e enues. On he o he
hand, income om capi al e enues and sales declined,
which may indica e a dec ease in asse s o a change in
he economic si ua ion in he egion. I is wo h no ing
ha since he UK is an economically de eloped coun y,
he go e nmen can easily delega e some o i s inancial
obliga ions o local au ho i ies. This obliges local go e n-
men s o look o new sou ces o income o co e hei
expenses and ul il hei exis ing esponsibili ies.
Denma k’s local go e nmen sys em has a long his-
o y o c ea ing pa ishes ha deal wi h local a ai s and
p o ide se ices o esiden s wi hin walking dis ance o
he chu ch. A e he Re o ma ion, hese pa ishes pa -
ially me ged, bu emained qui e small. Since he begin-
ning o he 19 h cen u y, he de elopmen o a mode n
iscal sys em o local sel -go e nmen began, when he
s a e delega ed some o he powe s o local au ho i-
ies, including oad main enance, social assis ance and
p ima y schools, which we e inanced h ough co- i-
nancing om he s a e budge un il 1970. Majo local
go e nmen e o ms in Denma k ook place in 1974,
when mo e han 1300 local adminis a i e di isions
we e me ged in o 277 municipali ies and 14 coun ies.
These e o ms coincided wi h he na ional wel a e s a e
de elopmen p og amme, which equi ed new, la ge
municipali ies o p o ide basic social se ices such as
child ca e, educa ion, and ca e o he elde ly, leading
o highe ax a es ha ose om 15% in 1975 o 25%
in 2013. In 2007, he e was a second wa e o e o ms,
which included he subsequen me ge o municipali ies
o 98 uni s and coun ies o 5 egions, he edis ibu ion
o compe encies and unding e o m, which included a
new block g an and equalisa ion scheme (Kjae ,2021).
Figu e2 shows a map o Denma k, aking in o conside -
a ion he implemen a ion o s uc u al e o m.
b)a)
Fedo enko
Economic Fo um, 2024, Vol. 14, No. 1
67
Funding o local communi ies in Denma k is p o-
ided h ough se e al main sou ces, including ax e -
enues and in e -budge ans e s. The main sou ces o
unding include ax e enues and in e -budge ans-
e s. Tax e enues consis o pe sonal income ax,
which is he main sou ce o income o municipali ies,
and p ope y ax, which includes axes on esiden ial
and comme cial eal es a e. In e -budge ans e s in-
clude block g an s om he s a e budge , which help
equalise inancial oppo uni ies be ween di e en
municipali ies and amoun ed o app oxima ely DKK
40 billion in 2020 (Wo ldwide Tax Summa ies, 2024),
and equalisa ion g an s ha compensa e o inancial
inequali ies be ween municipali ies. In addi ion, munic-
ipali ies ecei e capi al e enues om he sale o asse s
and o he sou ces. Table2 shows he a es o some lo-
cal axes, which a e a sou ce o unding o local com-
muni ies in Denma k, as o 2024.
Table 2. Ra es o some local axes, which a e a sou ce o unding o local communi ies in Denma k, as o 2024
Local axes Ra e, %
Municipal ax 25.067
Chu ch ax 0.65
Labou ma ke ax 8
Land ax 2.8
Sou ce: compiled by he au ho based on Wo ldwide Tax Summa ies(2024)
Table 3. Tools and sou ces o unding o local communi ies in Slo enia
No. Tools and
sou ces Explana ion
1 Own esou ces
Municipali ies independen ly gene a e mo e han 90% o hei esou ces. Own esou ces include:
income ax (54% o ax ealised in he yea be o e), land and eal es a e use ax, wa e anspo ax,
eal es a e u no e ax, inhe i ance and gi ax, ax on winnings om adi ional gambling, ou is ax,
municipal axes, adminis a i e ees and cha ges, en i onmen al axes, ines, p ope y income ( en ,
concession ees), municipal con ibu ion, con ibu ions om ci izens and su cha ges
o ce ain p og ammes, sel - axa ion, capi al gains and dona ions.
2
T ans e s
om he s a e
budge and EU
unds
These a e addi ional unds ha municipali ies ecei e o suppo hei ac i i ies
and in as uc u e de elopmen , which help o ensu e he inancial s abili y o local communi ies
and equalise hei capabili ies.
3 Bo owing
Local e i o ial communi ies also ha e he igh o ake ou loans o inance hei p ojec s and ini ia i es.
Local communi ies in Slo enia can bo ow om he s a e budge , om Slo enian banks o sa ings
banks au ho ised by he Bank o Slo enia o p o ide banking se ices, and om s a e unds ha p o ide
loans. These bo owings a e used o he implemen a ion o he municipal budge in he cu en yea ,
in es men and deb managemen o he municipal budge . Municipali ies included in he uni ied
easu y accoun sys em o he s a e o municipali y may also ake deb s om he asse manage o he
uni ied easu y accoun sys em. Fo p ojec s ha a e co- inanced om he EU budge , hey can ake ou
deb s in he amoun o app o ed unds and o he pe iod un il hey ecei e hese unds. The amoun o
bo owing o he implemen a ion o he municipal budge and deb managemen is de e mined
by he decision on he adop ion o he budge , and o ensu e liquidi y, bo owing can amoun
o up o 5% o he o al amoun o expendi u es o he las adop ed budge . The Municipal Finance Ac
egula es he maximum amoun o bo owing.
Sou ce: compiled by he au ho based on Minis y o Finance o he Republic o Slo enia(2024)
Since he 2007 e o m, local communi ies in Den-
ma k do no ha e he igh o collec axes (p e iously,
he second le el o local sel -go e nmen collec ed axes,
bu mos o hese powe s we e ans e ed o municipal-
i ies). Re enues o Danish municipali ies include block
g an s om he na ional budge and con ibu ions om
municipali ies in he o m o co- inancing o se ices.
Heal h unding includes a block g an om he na ional
budge and co- inancing o hospi als by municipali ies,
which accoun s o mo e han 90% o all coun y e e-
nues. Regional de elopmen is inanced by block g an s
om he na ional budge and co- inancing om munici-
pali ies. Social se ices and special educa ion a e unded
by municipali ies on a ixed basis (on a paid basis). The
sys em o inancing local communi ies in Slo enia p o-
ides o uni o m ules o all municipali ies, ega dless
o hei size o speci ics. The main goal o his sys em
is o ensu e equal oppo uni ies o mee he needs and
in e es s o ci izens in all municipali ies. Funding o mu-
nicipali ies in Slo enia comes om h ee main sou ces
(Table3). Figu e3 shows he sou ces o unding o local
communi ies in Slo enia o 2018-2023 in millions o EUR.
Tools o inancing local economic de elopmen ...
Economic Fo um, 2024, Vol. 14, No. 1
68
I is also wo h no ing ha he law on municipal i-
nancing egula es he inancing sys em equally o all
municipali ies and de ines he ax base, ax a es, ax-
paye s, and g ounds o g an ing bene i s. In addi ion,
municipali ies independen ly se compensa ion a es
o he use o land plo s o cons uc ion h ough hei
egula ions. Such a sys em is aimed a ensu ing he i-
nancial independence and s abili y o local communi ies
in Slo enia, allowing hem o e ec i ely pe o m hei
unc ions and mee he needs o ci izens.
Financing o municipali ies in Slo enia is ca ied ou
based on he p ime na po aba (app op ia e cos s) sys-
em, which ensu es equal inancial oppo uni ies o all
municipali ies o pe o m manda o y asks. This p oce-
du e begins wi h he calcula ion o he a e age cos pe
inhabi an (po p ečnina). The calcula ion me hodology
is de e mined by he go e nmen using da a om he
las ou yea s. The Minis y o Finance p epa es he es-
ima es and sends hem o ep esen a i e associa ions
o municipali ies o hei opinions. Based on he calcu-
la ed po p ečnina, a c edi amoun is de e mined o
each municipali y o comple e manda o y asks. I he
sha e o income ax e enues does no co e hese ex-
penses, he s a e p o ides he necessa y unds h ough
inancial equalisa ion (Minis y o Finance o he Repub-
lic o Slo enia,2024).
The de elopmen o municipali ies is assessed
based on economic de elopmen (g oss alue added
pe employee, income ax base pe esiden , numbe
o jobs). This sys ema isa ion o inancing helps o en-
su e he s able de elopmen o municipali ies and hei
inancial au onomy.
Fea u es o inancing local economic de elopmen
o e i o ial communi ies o Uk aine and ecom-
menda ions o implemen ing he success ul expe i-
ence o coun ies in imp o ing i
Financing o e i o ial communi ies in Uk aine is based
on se e al main sou ces. The main ones a e local axes
and ees, such as p ope y and land axes, and a sin-
gle ax o en ep eneu s. In addi ion, a signi ican pa
o he budge is o med by s a e ans e s in he o m
o sub en ions and subsidies ha a e di ec ed o ed-
uca ion, heal hca e, and o he social needs. Te i o ial
communi ies also ecei e g an s and unding h ough
in e na ional p og ammes and na ional ini ia i es ha
suppo in as uc u e p ojec s and he de elopmen
o local ini ia i es. In addi ion o adi ional sou ces
o inancing, communi ies ha e he oppo uni y o a -
ac loans and bo owings o he implemen a ion o
la ge p ojec s. In es men p ojec s and public-p i a e
pa ne ships also play an impo an ole in inancing,
allowing he p i a e sec o o be in ol ed in in as uc-
u e de elopmen . Suppo o local en ep eneu ship
h ough consul ing se ices, so loans, and o he ools
con ibu es o economic g ow h and imp o es he qual-
i y o li e in communi ies.
A e he s a o he e o m in 2014, he uni ed e -
i o ial communi ies ecei ed he same powe s and e-
sou ces as ci ies o egional signi icance, including he
ans e o 60% o pe sonal income ax o hei local
budge (Decen alisa ion Re o m, 2014; Decen alisa-
ion,2024). In addi ion, hey ully e ain local e enues
om he single ax, co po a e income ax and inancial
ins i u ions o communal p ope y, and p ope y ax.
This allows communi ies o independen ly sol e issues,
such as oad epai s o he cons uc ion o new schools,
wi hou wai ing o unding om he egion. In addi ion,
hey can use addi ional e enues o a ac in es men
and de elop local businesses, which will help o c ea e
new jobs and inc ease he economic po en ial o he
communi y. Figu e4 shows he s uc u e o local budge
e enues o he pe iod 01.01.2024-04.04.2024. Based
on he p ocessed in o ma ion, Table4 sys ema ises he
main p oblems in inancing he economic de elopmen
o e i o ial communi ies o Uk aine as o 2024.
Figu e 3. Sou ces o unding o local communi ies in Slo enia o 2018-2023, million EUR
Sou ce: compiled by he au ho based on Minis y o Finance o he Republic o Slo enia(2024)
1499.99 1557.72 1664.85 1698.14 1760.27 1885.23
397.4 382.33 361.33 389.65 481.97 502.34
68.85 53.91 67.5 84.15 67.27 62.41
180.6 234.53 229.36 319.09 446.16
844.32
0
500
1000
1500
2000
2018 2019 2020 2023
Tax e enues
Capi al income
Dona ions ecei ed
Funds ecei ed om he EU and o he coun ies
2021 2022
T ans e e enues
Non- ax e enues
Fedo enko
Economic Fo um, 2024, Vol. 14, No. 1
69
Figu e 4. S uc u e o local budge e enues o 4 mon hs o 2024 (01.01.2024-04.04.2024)
Sou ce: compiled by he au ho based on Decen alisa ion (2024)
Table 4. Main p oblems in inancing he economic de elopmen o e i o ial communi ies in Uk aine as o 2024
No. P oblems Explana ion Au ho ’s commen
1Ins abili y and
insu icien budge
e enues
Local budge s o en ace ins abili y and insu icien
e enue om axes and ees due o he economic
di icul ies associa ed wi h he wa . Fo example,
declining economic ac i i y and he des uc ion
o businesses in a wa zone educe ax e enues.
The ins abili y o ax e enues, combined wi h
he wa , c ea es se ious challenges
o inancing i al se ices and in as uc u e.
2
Imbalance
be ween income
and expenses
The imbalance be ween income and spending
is exace ba ed by inc eased spending on de ence
and social needs, which leads o local budge
de ici s. The wa also a ec s he inc eased cos
o es o ing in as uc u e.
To a oid budge de ici s, e ec i e me hods
should be de eloped o educe cos s and
manage esou ces, especially in he con ex
o es o ing des oyed acili ies.
3
Unsa is ac o y
access o
go e nmen
ans e s
The dis ibu ion o ans e s may be ine icien
o delayed due o adminis a i e di icul ies.
Fo example, delays in alloca ing unds o he
es o a ion o in as uc u e in a wa zone.
I equi es imp o ing he ans e dis ibu ion
sys em and educing bu eauc a ic ba ie s
o speed up he inancing o c i ical p ojec s.
4
Di icul ies wi h
access o loans
and bo owings
Local communi ies ace p oblems accessing loans
and bo owings due o inc eased isks, high a es,
o limi ed a ailabili y o unding in imes
o wa . Many inancial ins i u ions may be mo e
ca e ul when issuing loans.
I is impo an o es ablish mechanisms
o suppo local budge s o ensu e access
o unding, possibly h ough go e nmen
gua an ees o special p og ammes.
5
Insu icien
e ec i eness o
public-p i a e
pa ne ships
Public-p i a e pa ne ships a e o en di icul due
o he unce ain y and isks associa ed wi h wa .
P i a e in es o s may be less likely o in es in
p ojec s in con lic zones o high- isk en i onmen s.
The e is a need o de elop new and mo e
ele an me hods o a ac ing in es o s
and o ensu e g ea e anspa ency and
c edible sa egua ds o enhance coope a ion.
6
Limi ed
oppo uni ies o
in es men in local
en ep eneu ship
The wa leads o a dec ease in in es men in local
en ep eneu ship due o high isks and economic
ins abili y. Local en ep eneu s may ace p oblems
accessing unding and esou ces.
I is necessa y o p o ide suppo
o en ep eneu s, including so loans
and g an s, o s imula e economic ac i i y
and eco e y.
Sou ce: compiled by he au ho based on T. Vasyl si e al.(2021), M. Bonda chuke al.(2022), M.Pa ynska-Pope a &
T.Zinchuk(2022)
35%
20%
12%
9%
8%
5%
3% 2%
2% 1%
Pe sonal income ax
Sub en ions om he s a e budge o Uk aine o local budge s
Single ax
Subsidies om he s a e budge o Uk aine o local budge s
P ope y ax
Co po a e income ax
Own e enues o budge a y ins i u ions
3%
The analysis o he p oblems o inancing he
economic de elopmen o e i o ial communi ies in
Uk aine in he con ex o a long wa highligh s a numbe
o exis ing p oblems aced by local budge s. The ins abil-
i y o ax e enues, he imbalance be ween income and
expendi u e, p oblems wi h access o c edi and loans,
co up ion and ine icien managemen mechanisms
pose se ious challenges o ensu ing sus ainable egion-
al de elopmen . To o e come hese p oblems, Uk aine
should pay a en ion o he success ul expe ience o
o he coun ies ha demons a e e ec i e models o i-
nancing local de elopmen . The s udy and adap a ion o
bes p ac ices, such as anspa en mechanisms o he
dis ibu ion o public ans e s, suppo o public-p i-
a e pa ne ships and e ec i e use o in e na ional
unding, can signi ican ly imp o e he si ua ion. The ec-
ommenda ions include he in oduc ion o new inancial
ins umen s, e o ms in he ield o public adminis a-
ion, and he de elopmen o mechanisms o suppo
local en ep eneu ship, which can p o ide mo e s able
