The All-Ukrainian Association of Amalgamated Territorial Communities (AAATC) has called for 64 per cent of personal income tax to remain in the budgets of all communities, with a separate subsidy provided to compensate for tariff differences.

This was reported by the AAATC.

The Ministry of Finance held budget consultations on preparing the draft State Budget law for 2026. The event was attended by representatives from the Ministry of Finance, the Ministry for Development of Communities and Territories of Ukraine, regional military administrations, territorial communities and all-Ukrainian associations of local governments.

Oleksandr Korinnyi, Head of the All-Ukrainian Association of Amalgamated Territorial Communities (AAATC), presented proposals on behalf of the organisation.

Key stance: 64 per cent personal income tax for all communities

‘Our stance remains unchanged – we propose retaining 64 per cent of personal income tax for all communities. The alternative of providing a separate subsidy to cover the difference in tariffs instead of 4 per cent personal income tax is unacceptable to us because it would only benefit selected communities with centralised enterprises, rather than small or rural communities. According to our calculations, 4 per cent personal income tax equates to approximately UAH 15.9 billion, which should be distributed to all communities for their development. We ask that this be taken into account,’ emphasised Oleksandr Korinnyi.

Mr Korinnyi believes that the issue of tariff difference compensation should be resolved separately, via a subsidy included in the draft State Budget Law.

Proposals from AAATC: finance, education, legislative changes

Personal income tax (PIT):

• fixing 64 per cent of PIT to local government budgets (excluding Kyiv) on a permanent basis, with the prospect of raising this figure to 75 per cent once martial law has ended (as decided by the AAATC Board);
• return of the military PIT to community budgets – from the monetary allowance and payments of law enforcement employees;
• improving the mechanism for the horizontal equalisation of tax capacity in local budgets;
• preserving existing sources of income without removing stable revenue streams.

Education:

• increasing the amount of educational subsidies to account for inflation and gradually raising teachers’ salaries;
• stable funding for key educational programmes: creating safe conditions in schools, providing meals for pupils, the New Ukrainian School programme, purchasing buses, and equipping specialised classrooms;

• improving the formula for distributing educational subsidies to take into account the real needs of communities.

Other issues:

• preventing the transfer of expenditure powers without compensatory resources;
• expanding the powers of communities in the administration of local taxes and fees;
• strengthening the financial independence of communities, in particular by removing restrictions on the use of surplus funds;
• separate subsidy to compensate for tariff arrears;
• revision of the minimum rent for land;
• allocation of funds to compensate for privileged travel;
• financing of the maintenance of roads of national importance;
• introducing tools to support frontline territories;
• simplifying public-private partnership mechanisms;
• clearly defining the concepts of ‘public investment’ and ‘capital expenditure’.

The Association’s statement reiterates that the Budget Declaration for 2026–2028 incorporates several important principles:

• preservation of single tax revenues for local budgets;
• preservation of the transfer of 13.44 per cent of fuel excise duty to community budgets;
• increased funding for the State Regional Development Fund, in particular with the support of international partners;
• revision of the Unified Tariff Scale and a phased increase in the minimum wage in 2026–2028.

At the same time, the AAATC notes that increasing wages in the public sector will make jobs more attractive and help to recruit young professionals. However, this will put additional pressure on local budgets and require expenditure to be optimised.