FINANCIAL DECENTRALIZATION AS A TOOL FOR REGIONAL DEVELOPMENT IN THE DIGITAL ECONOMY

Abstract

The article examines financial decentralization as an important tool for regional development in Ukraine in the context of the formation of a digital economy. It reveals the content and consequences of the reforms initiated after 2014, which led to a significant redistribution of financial powers between the central and local levels of government. It has been established that the introduction of financial decentralization has contributed to strengthening the revenue base of local communities, expanding their opportunities to generate their own financial resources, and implementing local development programs. At the same time, it was found that some communities remain highly dependent on state subsidies and grants, which indicates the existence of interregional disparities in budgetary capacity and uneven socio-economic development. It is emphasized that a number of regions have a limited tax base, while a significant share of the country’s public resources is generated in more economically active regions, which exacerbates territorial fiscal asymmetry. Particular attention is paid to combining the processes of financial decentralization with the digital transformation of the public sector, which ensures a new quality of local finance management. It has been determined that digitalization has become an important factor in the modernization of the regional management system, contributing to increased transparency, accountability, and efficiency in the use of budget resources. It has been substantiated that digital technologies contribute to increasing the financial independence of communities, facilitate accounting, monitoring, and forecasting of revenues, and create the conditions for decision-making based on reliable data. It is concluded that financial decentralization in Ukraine has become a catalyst for the formation of an effective model of regional governance focused on enhancing the capacity of local communities and ensuring sustainable regional development. At the same time, further progress in this area requires improving horizontal and vertical equalization mechanisms, reforming the system for allocating personal income tax revenues based on the taxpayer’s place of residence, expanding the local tax base, and more actively introducing digital technologies for managing budgetary processes.