Formation of Local Budgets Revenues in the EU Member States

Abstract

The aim of the article is to generalize and systematize the experience of formation of local budget revenues in the EU Member States. It is determined that the average value of the ratio of local budget revenues to GDP in 27 EU Member States for the period 2001–2022 is 12.24%, but the range of values of this indicator varies significantly by country. Thus, in island countries, such as Malta and Cyprus, this ratio is 0.58% and 1.69%, respectively, while in Denmark it constitutes 33.67%. Transfers have the highest fiscal significance in the structure of budget revenues of local budgets, followed by tax revenues. Tax revenues of local budgets include the category of local taxes and fees, as well as split revenues from national taxes (shared taxes). The category of the latter includes personal income tax and corporate tax. The article computes the degree of budgetary decentralization in the sphere of income in the EU countries. The most decentralized in terms of income are the Nordic countries, as well as countries with a three-tier budget system. In the sample of Central European countries that are members of the EU, the highest level of decentralization display the Czech Republic and Poland. The main source of tax revenues for local budgets is property taxes. The key advantages of including these taxes in the local ones are the immobility of the tax base, as well as the greater awareness of local authorities compared to the central authorities regarding the property status of residents of the territorial community, so it is a logical step that local authorities, in the vast majority of cases, set tax rates and determine tax benefits. It is found that in the EU Member States, in the vast majority of cases, two classic real estate objects – land and buildings – are taxed at the same time. However, in some cases, only land can be taxed – this practice is present, for example, in Estonia and Denmark, and in Lithuania, the Netherlands and Ireland, the object of taxation is buildings located on land plots, and the land itself is not subject to such taxation. The directions of increasing the fiscal efficiency of property taxes are substantiated.