FISCAL DECENTRALIZATION IN UKRAINE UNDER WARTIME CONDITIONS: TRENDS, CHALLENGES, AND POLICY PRIORITIES

The article examines the fiscal component of the economic decentralization of Ukraine’s public sector, understood here as the aggregate of the state, communal (municipal) and civil society sectors, and its transformation under conditions of full-scale war. Drawing on the theory of public goods reproduction and fiscal exchange, the article clarifies the mechanism by which decentralized provision of public goods improves the correspondence between supply and local preferences while increasing the accountability of local self-government bodies. The study establishes that the share of local budgets in the revenues of Ukraine’s consolidated budget, excluding transfers, which ranged between 22 and 24 per cent in 2017–2022, fell to 17.8 per cent in 2023 and 15.7 per cent in 2024. Structural-dynamic, comparative and institutional methods were applied in this article. The decline of local budgets’ personal income tax revenue in 2024 by UAH 31.9 billion, or 11.0 per cent, equivalent to approximately 7.2 per cent of their general fund revenues excluding transfers in 2023, is attributed primarily to the centralization of the tax withheld from military personnel’s monetary allowance. The scientific novelty lies in clarifying wartime fiscal centralization as a temporary shift in the proportions of public finance distribution that, absent a legislatively defined mechanism for restoring the revenue powers of territorial communities, may turn into a structural deformation of intergovernmental fiscal relations, and in proposing criteria for distinguishing these two states. The policy priorities are differentiated across three time horizons: wartime, transitional and post-war. They include targeted support for frontline and de-occupied communities, legislative determination of the timeframe and procedure for restoring local revenue sources, gradual reform of personal income tax allocation, strengthening local fiscal autonomy, and aligning Ukraine's multi-level governance framework with European standards.