Prepared by Kamran Ismailov

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• Prepared by Kamran Ismailov
• Willamette University
• Atkinson Graduate School of Management
• Salem, Oregon, Spring 2002

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The Government Expenditures
Transportation Environment Energy
Community development Agriculture Social
security Interest Education
Science/space/technology General Government
National Defense International Affairs
Income security Health Medicare Social
security Veterans Services Education
Commerce Administration of Justice
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The Main sources of the Governments revenue
Taxes (Individual, Corporate and Social
Insurance) Excise taxes and Public Fees
Customs duties Tariffs, etc. Foreign
bonuses Utility pays Government Reserves
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Types of Decentralization
Political Decentralization
Administrative Decentralization Fiscal
Decentralization Privatization Deregulation
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Budgeting System of Ukraine Governt
Monetary collections of Ukraine Republic
Verhovna Rada (Local Parliament)
Cabinet of Ministers
Ministry of Finance
Annual Budget of Ukraine Republic
Annual State Expenditures Programs
Local-Regional Municipalities
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Ukraine Govern't tries to answer

• What are responsibilities of state and local
  governments in respect to the budget
  expenditures?
  
• How should these expenditures be funded?
• How should the gap between revenues and
  expenditures be covered?
  
• If decentralized how to regulate the budget
  relationships between the state and local
  governts?
  
• How to ensure full coverage on the social
  protection in the state and local govern'ts
  programs?
  
• How to separate the revenues between local and
  state governts?
  

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What is the answer?

• The answer is Create the budget codes that will
  divide expenditures into groups according to the
  principle of subsidiary.
  
• The budget codes will clearly define function,
  where and how each budget expenditure should be
  financed.
  
• Regulate budget transfers between State and
  Local Self-Government entities

Local Budget expenditures
Expenditures taken into account
on transfer calculations
Expenditures NOT taken into account
on transfer calculations
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Ukraine - Local Self-Govern'ts revenue sources

• These are
• State duty (related to local budgets)
• License fees for some economic activities
• Fee for state registration of business entities
• Trade patent fees for some business activities
• Proceeds from penalties imposed by executive
  bodies of local Radas
  
• Single tax for small business entities related
  to local budgets
  
• The land tax 50 stays in local budgets

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Ukraine - Local Self-Govern'ts revenue sources

• Oblast budget
• 25 of the personal income tax
• 25 of the land tax
• license fees for some business activities
• Rayon budget
• 50 of the personal income tax collected in
  local communities
  
• 25 of the land tax within the limits of rayon
• License fees, state registration fees, and
  fines
  

Oblast
Rayon
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Ukraine Govern't Local borrowings

• Budget codes stop loans from other budgets
• Only credit and financial orgns may grant loans
  to local budgets
  
• Mechanism of borrowing is available only for
  city Radas with population above 800000 and
  oblast Radas
  
• Budget codes limit the debt by 10 of annual
  expenditures
  
• Each outstanding payment will be penalized by
  the 5-year ban to make borrowings
  

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Ukraine Govern't - Advantages of the Budget
Reforms

• Adoption of Budget Codes is break thorough of
  the Public Reforms
  
• Social and Economic development of local
  communities
  
• Transparency of Nation budget structure has
  grown
  
• Created a great public support in the country in
  reforming of the Public sector
  
• Clear procedures for loans and local budgets
  were provided
  
• Fundamental basis for corruption prevention is
  set up in Public Financial sector
  

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Ukraine Govern't - Advantages of the Budget
Reforms

• Delivers a stimuli for local economic
  development, expansion of taxation base, growth
  of receipts from tax payments, ensuring
  development of regions and support depressive
  zones.
• Delivered coherent and complete specification of
  all budget process procedures
  
• Financial resources and their receivers are
  specified and defined
  
• Support of local Govern'ts in tax collection

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Ukraine Govern't - Obstacles of the Budget
Reforms

• Methodological shortage in professional
  experts to conduct
  
• reforms
• Political aspects of Public Reforms by the State
  Government
  
• Legal irregularities or gaps and drawbacks in
  local legislation
  
• Bureaucratic elite this layer of social strata
  is losing a political power
  
• Common Ukrainian mentality almost habitual
  disrespect of law by Ukrainian citizens
  

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Azeri Governt Budgeting System
Monetary collections of Azeri Republic
Milli Mejlis (Local Parliament)
Cabinet of Ministers
Ministry of Finance
Annual Budget of Azeri Republic
Annual State Expenditures Programs
Local-Regional Municipalities
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Azeri Governments Policy Agenda

• Second Structural Adjustment Credit (SAC-II)
  Between Azeri Governt IMF PRGF in July 2001In
  particular, SAC-II will support public sector
  reforms to strengthen (i) management of future
  energy revenues (ii) policies and institutions
  for public expenditure management (iii) poverty
  monitoring, social services and safety nets,
  especially for the vulnerable refugee and
  internally displaced groups.

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Azeri Governments Policy Agenda
Establish public sector institutions Adopt
policies conductive to private sector
Preserve human capital Minimize the hardship
on vulnerable groups Reforms in Public
Expenditure Management
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Azerbaijan Country Assistance Strategy, FY00-02

• Improve Expenditure management (including
  auditing)
  
• Revise generic budget law
• Increase budget coverage
• Improve budget preparation procedure and
  disclosure
  
• Improve budget execution procedures
• Reform public procurement
• Extend coverage of treasury
• Create a supreme audit institution

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Azerbaijan Country Assistance Strategy, FY00-02

• Design and Implement Administrative reforms
• (including civil service reforms)
• Improve the transparency
• Implement a civil service reform strategy
• Implement the licensing regime
• Implement a revised pay policy for the budgetary
  sector
  

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Azeri Govern't Problems

• Absolute education, old soviet mentality
• Red tape, self established rules
• Corruption, bribing, dragging reforms in sense
  of authority power losses
  
• Recruiting, old generation, staff is not
  motivated
  
• Less involvement of Graduates from Foreign
  Universities
  
• War in Nagorny - Karabakh