Authors:
Kateryna Ivanchenko, Head of the Centre for Innovation Development
Iryna Fedoriv, head of the Golka civil initiative
The problem of helping communities at the frontline has remained extremely relevant throughout the three years of the full-scale invasion. Unfortunately, this topic has become a cause not only for serious discussion, but also for manipulation by the central government. The Centre for Innovation Development, together with the Golka civic initiative, investigated how local authorities financed the needs of the frontline in the absence of the “military” and “security” personal income tax that communities did not receive from the state budget at the end of 2023 and in 2024, as well as how communities ensured reconstruction after enemy attacks.
In general, over the past year, 262 surveyed communities allocated about UAH 25 billion from local budgets for the needs of communities and the defence forces. Of this amount, about UAH 9 billion was allocated for their own needs and community defence, and UAH 15 billion for the defence forces in general. Therefore, the total amount for Ukraine is much higher.
The surveyed communities spent at least 0.01% of their annual budgets on defence forces, and at most 24.3%. The study deliberately does not provide figures for individual communities for security reasons , and the information is analysed by region. It is important to note that the number of communities that answered the questions and provided their data varies across oblasts. Therefore, in this text, we are not comparing who spent more, but rather informing that communities continue to help the frontline even after the state has taken away the military personal income tax and allegedly completely taken over this function.
Where are the funds to finance the defense forces?
The “military” and “security” personal income tax is a tax on the income of military personnel, emergency responders, law enforcement officers and security personnel (police officers, prosecutors, special services, and rank-and-file and senior officers), which they paid to the local budget in previous years.
It is important to understand that until 2022, when the “military” and “security” PIT went to the budget of the community where the military unit was legally registered, it was not as significant as after the full-scale invasion.
The local authorities did not agree with the parliament’s decision to remove the “military” and “security” PIT. Deputy Mayor of Dnipro Volodymyr Miller said:
“Those military personnel whose personal income tax was taken away from city budgets – their families now live in the city. And many of those who are now in the military used to have other professions, and their taxes went to the city budget. The city lost this when they joined the Armed Forces. At least some of this personal income tax should have been left to the communities.”
When the number of military personnel increased significantly three years ago, the amount of deductions to the community budget also increased significantly in 2022 and 2023.
It turned out that the state paid the salaries of the military, the tax went to the budget of local communities, and the state had to provide for the military again. Defence spending, including military salaries, cannot be financed by international partners. This can only be done with taxes paid to the state budget directly by Ukrainians. That is why the state has reclaimed the “military” and “security” personal income tax to perform its functions.
But even after the local budget de facto ran out of funds for defence, citizens still picketed local governments demanding more funds to support the Armed Forces.
A rally near the Kyiv City Council in early 2024
One of the architects of decentralisation, expert Yuriy Hanushchak, explains that the state should have a division of functions between the national and local levels of government, and each level should have adequate funding to perform these functions:
“Defence is indeed a state function. However, in my opinion, the state itself does not cope with this function. Local government is more flexible. Therefore, it would be logical to allow local governments to lend a hand to the state in the current extreme conditions. To do this, the state should leave personal income tax from all taxpayers to local governments.”
How this personal income tax is to be distributed is a matter of debate.
Who returned the most money to the state budget?
Mykhailo Leichenko, Deputy Director of the Centre for Innovation Development for Analytics and IT, whose team was involved in data collection and processing, explains:
“Indeed, defence is a function of the state, and funds for it should be in the state budget. But the data we have collected and analysed shows that communities continue to help the frontline to eliminate the consequences of armed aggression. And this is understandable. National security is now a value for everyone.”
According to the data provided by the communities, Dnipropetrovska oblast helped the defence forces the most in the first three quarters of 2024 – almost UAH 786 million came from local budgets.
Odesa region ranks second. Here, spending reached UAH 586 million.
Oleksandr Slobozhan, Executive Director of the Association of Ukrainian Cities, emphasises that since the beginning of the full-scale war, international experts have named local self-government and decentralisation reform as one of the factors of victory, which has created a unique system with more than a thousand sources of support for the Armed Forces:
“For almost three years, despite the state’s withdrawal of ‘military’ and ‘security’ personal income tax, systemic underfunding of delegated powers (education, healthcare, social protection) and withdrawal of reverse subsidy funds, municipal authorities have formed a unique system of assistance to the military in three areas. The first is assistance to units formed or located in a particular community. The second is assistance to military personnel who joined the army from this community. The third is the construction of fortifications in cooperation with military administrations. Local governments provide assistance systematically, despite the constant attempts of some government officials to make it impossible. At the same time, municipalities continue to provide services to community residents, organise IDPs ‘ lives and business relocation, and help the military. That is why all the actions against local governments last year failed. Because active true leaders of communities and civil society see the crucial importance of local self-government in preserving Ukraine. Municipalities are helping the military, in effect implementing Article 17 of the Constitution of Ukraine. At the same time, this article emphasises that the protection of Ukraine’s sovereignty and territorial integrity are the most important functions of the state. It also explicitly states that “the state shall ensure social protection of citizens of Ukraine serving in the Armed Forces of Ukraine and other military formations, as well as members of their families”. This is fully consistent with the unitary nature of Ukraine as defined by Article 2 of the Constitution.”
It is worth noting that the data collected for the three quarters of last year did not include the amount of money spent on emergency services, assistance to military families, etc. Only the funds for the defence forces were calculated. Therefore, the amount of aid is actually higher.
If we analyse the amounts that communities have returned from the local budget in the form of subventions to support the defence forces to the state budget for further distribution, Kyiv tops the ranking. According to the city’s plans, more than UAH 4.4 billion should have been transferred from the capital’s budget to the state budget last year.
At the same time, Serhii Ohorodnyk, a journalist from Kyiv who covered the activities of the Kyiv City Council for the CHESNO movement and went to the front in February 2022, explains that given that the function of ensuring defence belongs to the state, local authorities will not be able to cover all needs:
“There are different levels. Tactical and strategic. The tactical level is when rebs and drones can be purchased by local communities to partially cover the needs of the frontline. But what happens when one community provides drones to ‘its’ soldiers, while another community does not? If we are talking about the strategic level, is any community able to “pull” an ammunition factory or the development of the latest weapons?”
Serhiy Ohorodnyk, photo of the separate 78th Air Assault Regiment
At the beginning of the year, ZN.UA wrote that the Ministry of Defence had submitted a resolution to the Cabinet of Ministers on payments to military personnel from local budgets.
However, this initiative directly violates the principle of equality of citizens, including military personnel. After all, the military from capable communities will receive UAH 100, 400 thousand, while those from poor, unable communities will not. That is a topic for a whole other discussion.
How to minimise corruption and provide quality assistance to the frontline?
Despite the fact that communities are now helping the frontline at the tactical level, the amounts they have given to defence are considerable for local budgets. War is always a significant expense, and therefore the total amount in the overall defence budget is not significant. However, these funds should be used effectively. There should be appropriate coordination between local governments and the Ministry of Defence. This is emphasised by Deputy Minister Denys Uliutin:
“Local self-government bodies provide assistance to the defence forces upon their request. It is impossible to call such assistance systemic, as it concerns individual units, not those that need such assistance to perform combat missions efficiently. The lack of clear coordination between the Ministry of Defence and local governments in terms of identifying needs does not always lead to the effectiveness of such assistance. In addition, not all local governments have the capacity to provide financial support to the defence forces, which makes it impossible to reach everyone with such assistance. Financially capable communities mostly support units based or formed on their territory”.
Indeed, the problem lies in the transparency and quality of what is purchased. Mykhailo Leichenko, a representative of the Center for Innovation Development, emphasizes that local budget expenditures on procurement should be visible to citizens:
Local budgets allocate significant amounts to help the front. That is why it is necessary to create a “single window” for weapons procurement and the distribution of funds for the defense forces’ needs. This way, both the state and local levels can see a full cross-section of needs, prioritize costs, and minimize corruption risks in procurement. The Ministry of Defense has developed and approved a codified list of weapons, which is updated as new models become available.
These samples are tested and verified for safety and effectiveness. Of course, the Ministry of Defence has more information about the needs of our soldiers. For obvious reasons, not all procurements at this level are visible, which increases corruption risks and calls into question the effectiveness of such spending.
Leichenko adds that the Defence Research Cluster has studied the index of promoting the effectiveness of the Ministry of Defence in terms of order planning and development of weapons and military equipment:
Civilians are now more positive about the effectiveness of the Ministry of Defense in formulating current and future needs for the defense forces. As for the military, they see that the MoD’s work is getting better, but they still do not consider it perfect. This is evidenced by the results of the Defense Research Cluster survey.
P.S. Today marks 40 days since the founder of the Centre for Innovation Development, Serhiy Loboyko, who started this project, passed away. With this publication and the full research, we show everyone that his work is not only alive, but we are continuing it. This is important not only for his family, but also for us and our readers. May he rest in peace.
!If a local authority that did not provide data in time to the requests made during the preparation of the study wishes to do so, they can be sent to [email protected]er