How to help Ukrainian municipalities? Trust in wisdom and fair distribution of taxes
Address by Georg Milbradt, Special Envoy of the German Government to Ukraine
Georg Milbradt, Special Envoy of the German Government to Ukraine for Decentralisation, Good Governance and Civil Service, addressed the participants of the panel discussion "Building Strong Institutions" at the conference 'Building Sustainable Municipalities – What Does It Take?', organised by the U-LEAD with Europe Programme. He has practical experience in decentralisation and local government, having served as Minister of Taxes and Duties and Prime Minister of the Federal Land of Saxony. In addition, he holds a degree in economics, providing him with a strong theoretical foundation.
Mr Milbradt believes that Ukraine has made the right choice by relying on decentralisation. This decision has brought Ukraine closer to a European future, not just politically, but also ideologically and socially.
The European way
"Decentralisation is a cornerstone of European democracy, as people's self-determination is through their municipalities. A Polish professor told me that the population of his country has a 'big' homeland, which is Poland itself; and there is a 'small' homeland, which is at the level of their municipality, their community. That is, the places where people live, where their roots are. And this multi-level self-identification is very important.
On the other hand, the municipality is an institution that is close to the people and provides important and urgent local services. It is the first responder to residents' requests in the event of an emergency and, unfortunately, as we have learned, war. This is the place where the needs of the locals and the current situation are best understood, which is how the principle of subsidiarity works," he said.
According to Georg Milbradt, municipalities play a key role in learning, understanding, and implementing democracy. The decision to reform Ukraine from a state of top-down Soviet control to a modern bottom-up approach was crucial for building a strong Ukraine.
In fact, a local self-governing municipality is more responsive to local needs, challenges, and ideas. It is also an instrument of competition that leads to improved service delivery and overall quality of governance. The election, ability to compare with neighbors, and ability to influence almost every single decision guarantees public involvement, transparency, and responsibility of the authorities.
"A strong municipality is more sustainable. Even before the full-scale war, at the beginning of the reform, I heard the dictum that decentralisation would lead to separatism. The opposite happened, and the municipalities contributed to greater solidarity and cohesion. And this is exactly what is needed for a strong Ukraine," the professor believes.
The professor emphasizes that while the war in Ukraine continues, there can be no discussion of changing the methods of financing. However, once the conflict is resolved, the financial situation of communities should not only recover but also be renewed.
He also emphasized the importance of establishing a stable and reliable tax base to achieve true self-government, with the funds belonging to the municipalities.
In particular, Georg Milbradt recommends changing the system of distribution of personal income tax (PIT) in the future. Part of this tax should be collected directly on the local level. Currently, the state collects the tax and returns part of it to local budgets, which is not very efficient.
"The main task of local authorities is to provide services to the local residents. Following the war and the subsequent recovery process, it will be the responsibility of local authorities to employ individuals to clean up, dismantle rubble, build, and restore order. As a result, the majority of decisions regarding reconstruction will be made at the local level, along with the allocation of funds to finance the implementation of these decisions. We need to understand that fair distribution of personal income tax will contribute to a quick and reasonable recovery," Georg Milbradt explained his position.
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