Economic activity vs generation of local budgets’ revenues: Regional disparities in COVID-19 instability

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In the last two years, Ukraine and the world have been living in economic instability caused by the COVID-19 pandemic, which has fundamentally changed the trends in global and domestic economies, public and local finance. This study aims to estimate the trends of economic development of Ukrainian regions in the coronavirus crisis and their impact on the local budgets’ tax revenues generation. Main findings show the impact of the COVID-19 crisis on the development of Ukrainian regions is territorially differentiated. It is determined that in quarantine restrictions, the regions were developing under the impact of behavioral and institutional factors. Although a range of enterprises terminated their activities and there was a decline in income from business activities in 2020, the tax revenues of local budgets increased. The growth of tax revenues was accompanied by decreasing interbudgetary transfers and growing expenditures on containing the spread of pandemics and supporting healthcare. Reduced transfers to local budgets from the public budget affected the funding of investment programs of regional development.
The abovementioned effects of falling business activity and consumer expenditures of the population along with falling investment can be considered the delayed effects of economic activity curtailment in the short-term period. An intensive increase of public investment that stipulates projects co-funding from budget funds and resources of businesses and establishment of cooperation between public, regional, and local levels of government should become among the primary steps to overcome the negative trends.

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    • Figure 1. Dynamics of industrial and agricultural production and export of goods in 2020: interregional dimension
    • Figure 2. Dynamics of industrial production by economic activity types, 2019–2020 in %
    • Figure 3. Dynamics of main merchandise export groups in Ukraine in 2020
    • Figure 4. Dynamics of construction in 2020: interregional dimension
    • Figure 5. Growth of deposits attracted by deposit corporations (except for the National Bank of Ukraine) across regions, February 2020–February 2021
    • Figure 6. Local budgets’ revenues from personal income tax across regions, 2020
    • Figure 7. Local budgets’ single tax revenues across regions, 2020
    • Conceptualization
      Iryna Storonyanska
    • Funding acquisition
      Iryna Storonyanska
    • Investigation
      Iryna Storonyanska, Mariana Melnyk, Lilia Benovska, Natalia Sytnyk, Oksana Zakhidna
    • Project administration
      Iryna Storonyanska, Mariana Melnyk
    • Resources
      Iryna Storonyanska, Mariana Melnyk, Lilia Benovska, Natalia Sytnyk, Oksana Zakhidna
    • Supervision
      Iryna Storonyanska
    • Validation
      Iryna Storonyanska, Mariana Melnyk, Lilia Benovska, Natalia Sytnyk, Oksana Zakhidna
    • Writing – review & editing
      Iryna Storonyanska, Mariana Melnyk, Natalia Sytnyk
    • Data curation
      Mariana Melnyk, Lilia Benovska, Natalia Sytnyk, Oksana Zakhidna
    • Visualization
      Lilia Benovska, Oksana Zakhidna
    • Writing – original draft
      Lilia Benovska, Natalia Sytnyk, Oksana Zakhidna