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Prepared by Kamran Ismailov Willamette University Atkinson Graduate School of Management Salem, Oregon, Spring 2002

Prepared by Kamran Ismailov Willamette University Atkinson Graduate School of Management Salem, Oregon, Spring 2002 . The Government Expenditures.

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Prepared by Kamran Ismailov Willamette University Atkinson Graduate School of Management Salem, Oregon, Spring 2002

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  1. Prepared by Kamran Ismailov Willamette University Atkinson Graduate School of Management Salem, Oregon, Spring 2002

  2. The Government Expenditures * Transportation * Environment* Energy* Community development* Agriculture* Social security* Interest* Education* Science/space/technology* General Government * National Defense * International Affairs* Income security* Health* Medicare* Social security* Veterans Services* Education* Commerce* Administration of Justice

  3. The Main sources of the Government’s revenue * Taxes (Individual, Corporate and Social Insurance)* Excise taxes and Public Fees * Customs duties – Tariffs, etc. * Foreign bonuses* Utility pays* Government Reserves

  4. Types of Decentralization * Political Decentralization* Administrative Decentralization * Fiscal Decentralization * Privatization * Deregulation

  5. Budgeting System of Ukraine Govern‘t Monetary collections of Ukraine Republic Verhovna Rada (Local Parliament) Cabinet of Ministers Ministry of Finance Annual Budget of Ukraine Republic Annual State Expenditures & Programs Local-Regional Municipalities

  6. Ukraine Govern't tries to answer: • What are responsibilities of state and local governments in respect to the budget expenditures? • How should these expenditures be funded? • How should the gap between revenues and expenditures be covered? • If decentralized how to regulate the budget relationships between the state and local govern’ts? • How to ensure full coverage on the social protection in the state and local govern'ts’ programs? • How to separate the revenues between local and state govern’ts?

  7. What is the answer? • The answer is: Create the budget codes that will divide expenditures into groups according to the principle of subsidiary. • The budget codes will clearly define function, where and how each budget expenditure should be financed. • Regulate budget transfers between State and Local Self-Government entities Local Budget expenditures Expenditures taken into account on transfer calculations Expenditures NOT taken into account on transfer calculations

  8. Ukraine - Local Self-Govern'ts’ revenue sources • These are: • State duty (related to local budgets) • License fees for some economic activities • Fee for state registration of business entities • Trade patent fees for some business activities • Proceeds from penalties imposed by executive bodies of local Radas • Single tax for small business entities related to local budgets • The land tax – 50% stays in local budgets

  9. Ukraine - Local Self-Govern'ts’ revenue sources • Oblast budget • 25% of the personal income tax • 25% of the land tax • license fees for some business activities • Rayon budget • 50% of the personal income tax collected in local communities • 25% of the land tax within the limits of rayon • License fees, state registration fees, and fines Oblast Rayon

  10. Ukraine Govern't – Local borrowings • Budget codes stop loans from other budgets • Only credit and financial orgn’s may grant loans to local budgets • Mechanism of borrowing is available only for city Radas with population above 800000 and oblast Radas • Budget codes limit the debt by 10% of annual expenditures • Each outstanding payment will be penalized by the 5-year ban to make borrowings

  11. Ukraine Govern't - Advantages of the Budget Reforms • Adoption of Budget Codes is break thorough of the Public Reforms • Social and Economic development of local communities • Transparency of Nation budget structure has grown • Created a great public support in the country in reforming of the Public sector • Clear procedures for loans and local budgets were provided • Fundamental basis for corruption prevention is set up in Public Financial sector

  12. Ukraine Govern't - Advantages of the Budget Reforms • Delivers a stimuli for local economic development, expansion of taxation base, growth of receipts from tax payments, ensuring development of regions and support depressive zones. • Delivered coherent and complete specification of all budget process procedures • Financial resources and their receivers are specified and defined • Support of local Govern'ts in tax collection

  13. Ukraine Govern't - Obstacles of the Budget Reforms • Methodological – shortage in professional experts to conduct • reforms • Political aspects of Public Reforms by the State Government • Legal irregularities or gaps and drawbacks in local legislation • Bureaucratic elite – this layer of social strata is losing a political power • Common Ukrainian mentality – almost habitual disrespect of law by Ukrainian citizens

  14. Azeri Govern‘t Budgeting System Monetary collections of Azeri Republic Milli Mejlis (Local Parliament) Cabinet of Ministers Ministry of Finance Annual Budget of Azeri Republic Annual State Expenditures & Programs Local-Regional Municipalities

  15. Azeri Government’s Policy Agenda • Second Structural Adjustment Credit (SAC-II) Between Azeri Govern’t & IMF PRGF in July 2001In particular, SAC-II will support: public sector reforms to strengthen: (i) management of future energy revenues; (ii) policies and institutions for public expenditure management; (iii) poverty monitoring, social services and safety nets, especially for the vulnerable refugee and internally displaced groups.

  16. Azeri Government’s Policy Agenda * Establish public sector institutions * Adopt policies conductive to private sector * Preserve human capital * Minimize the hardship on vulnerable groups * Reforms in Public Expenditure Management

  17. Azerbaijan – Country Assistance Strategy, FY00-02 • Improve Expenditure management (including auditing) • Revise generic budget law • Increase budget coverage • Improve budget preparation procedure and disclosure • Improve budget execution procedures • Reform public procurement • Extend coverage of treasury • Create a supreme audit institution

  18. Azerbaijan – Country Assistance Strategy, FY00-02 • Design and Implement Administrative reforms • (including civil service reforms) • Improve the transparency • Implement a civil service reform strategy • Implement the licensing regime • Implement a revised pay policy for the budgetary sector

  19. Azeri Govern't Problems • Absolute education, old soviet mentality • Red tape, self – established rules • Corruption, bribing, dragging reforms in sense of authority power losses • Recruiting, old generation, staff is not motivated • Less involvement of Graduates from Foreign Universities • War in Nagorny - Karabakh

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