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Prepared by Kamran Ismailov Willamette University Atkinson Graduate School of Management Salem, Oregon, Spring 2002 . The Government Expenditures.

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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 Government’s 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 Govern‘t

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 govern’ts?

  • 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 govern’ts?


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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 orgn’s 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 Govern‘t 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 Government’s Policy Agenda

  • Second Structural Adjustment Credit (SAC-II) Between Azeri Govern’t & 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 Government’s 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


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