The Association of Ukrainian Cities (AUC) emphasizes the necessity of retaining 64% of the personal income tax (PIT) within local budgets, along with reverse subsidy funds.
This stance was expressed by the AUC in relation to the discussion of the State Budget project for 2026, submitted by the Cabinet of Ministers of Ukraine for the second reading, which, according to AUC representatives, neglects the critical needs of local self-governance.
According to the Parliament's resolution of October 22, 2025, 64% of PIT should remain in the budgets of territorial communities. However, this provision was not included in the updated budget version.
The AUC stresses that the removal of reverse subsidies will adversely affect the financial stability of rural and settlement communities, which is why the association demands that these funds be retained locally.
The organization also draws attention to the issue of educational subsidies. Local government representatives believe that all accumulated balances should remain in the communities to cover their educational needs. Meanwhile, in the draft budget for 2026, the government did not allocate 103.2 billion UAH in educational subsidies among communities, removed 150 million UAH for the "New Ukrainian School" program, and increased funding for the "Enhancement of Labor Prestige in Education" program from 53.8 to 59.8 billion UAH.
Additionally, the draft retains a provision whereby the state manages the residual funds of communities located in temporarily occupied territories. However, the AUC insists that these funds should be utilized by municipalities - local councils or military administrations - particularly for housing construction for residents of such communities.
For the second reading, the government has proposed 13 billion UAH in additional subsidies for 992 communities affected by the war, as well as retaining all other inter-budget transfers agreed upon with the Association of Ukrainian Cities in the first reading.
According to the updated document, 982 communities will receive a basic subsidy in 2026 amounting to 23.3 billion UAH. Reverse subsidies are to be paid by 203 communities, of which 130 are rural and settlement communities, totaling 15.5 billion UAH.
The AUC emphasizes that balanced financing of local self-governance is key to community development and the country's recovery amid the war.
It should be noted that on October 22, 2025, the Verkhovna Rada of Ukraine approved in the first reading the draft Law of Ukraine "On the State Budget of Ukraine for 2026", registry No. 14000, which instructed the Government of Ukraine to consider 64% of PIT in the composition of local budget revenues, as proposed by the Association of Ukrainian Cities.
