Property taxes to be administered by local authorities: draft law
Draft Law No. 11067 "On Amendments to the Tax Code of Ukraine and Other Legislative Acts to Improve the Administration of Property Tax" has been registered in the Parliament.
The purpose of the draft law is to strengthen the financial capacity of communities by changing the property tax administration system. Among the key objectives of the draft law are to increase the revenues of community budgets, reduce government spending on property tax administration, facilitate the continuation of decentralization reform, and develop communities and territories.
The draft law provides for the gradual transfer of property tax administration powers to local governments:
- the first stage - the relevant legislative provisions will be in force for 2 years. From January 1, 2025 to December 31, 2026, it is proposed to empower local governments to register and keep records of property taxable objects, conduct reconciliation of property tax payers, collect tax information on property tax and enter it into the information databases of the State Tax Service of Ukraine, send (deliver) tax notices-decisions on land payment;
- thesecond stage - starting from January 1, 2027 and on a permanent basis - provides for a significant expansion of the powers of local governments to administer property tax while ensuring that the State Tax Service of Ukraine supervises compliance by local governments with tax legislation in the area of property tax.
The introduction of the phased approach is explained by the need to ensure the gradual adaptation of local governments to the new property tax administration system and the need for time to conduct a quality inventory of assets (land, real estate) in communities, strengthening the material, technical and human resources of communities to fulfill their property tax administration powers.
According to lawmakers, expanding the tax powers of local governments will provide them with legal tools to increase revenues to community budgets. A similar model, which includes broad tax powers of local governments and the supervisory function of the central executive body that implements state tax policy, is used in unitary EU states with a similar legal tradition to Ukraine, such as the Republic of Poland and the Republic of Latvia.