Trends in the Diversification of Local Budget Revenues in the Regions of Ukraine

The aim of the article is to examine the level of diversification of local budget revenues and to identify trends and characteristics of revenue formation across regions, as well as structural shifts during wartime. The article analyzes the structure of local budget revenues for the regions of Ukraine from 2018 to 2024. To assess the impact of the full-scale invasion on local budget revenue formation, the period was divided into two sub-periods: 2018–2021 and 2021–2024. The study included an analysis of changes in the shares of budget revenue items, as well as major tax and non-tax revenue sources. During the study period of 2018–2024, two critical events occurred – the COVID-19 pandemic and the full-scale invasion of the country, which necessitated changes in the interaction between state and local budgets and had a negative impact on overall business activity in the country. The structure of revenues was affected by changes in the procedure for calculating official transfers, which led to a redistribution of all shares. Tax revenues play a key role in ensuring local budgets’ own revenues (excluding official transfers). It has been shown that there is a general trend towards a decrease in the role of personal income tax and levies. Revenues from local government investment activities are practically nonexistent. Investments in local projects can promote a faster recovery of regional economies and the stabilization of local budget revenues during the post-war reconstruction period. To provide a general characterization of the structural changes in the sources of local budget revenues in the regions, the Herfindahl-Hirschman index was calculated for 16 revenue items of local budgets and 7 items of tax revenues. The analysis of index dynamics showed that, overall across regions, there is a trend towards increasing diversification, with the index in 2024 being reduced to 1.8 times the level of 2018. In the structure of tax revenues, there was a weak tendency towards concentration, which significantly intensified in 2022–2023, but subsequently returned to the pre-war level. It was concluded that to ensure a higher level of diversification and to stabilize local budget revenues, greater autonomy of local government authorities is necessary, enabling them to utilize available opportunities and local resources. Further research should identify the factors that determine the level of diversification, ensure revenue stability during crisis periods, and can be activated by local government authorities.