Spectrum Journal of Innovation, Reforms and Development

Volume 14, April, 2023 ISSN (E): 2751-1731

Website: www.sjird.journalspark.org
WAYS TO INCREASE THE COMPETENCE OF LOCAL AUTHORITIES TO
ENSURE THE STABILITY OF LOCAL BUDGET REVENUES
Meyliev Obid Rakhmatullaevich
Associate Professor of Tashkent Financial Institute,
Doctor of Economic Sciences (DSc).

Gofurova K.
Student of the Tashkent Financial Institute

ABSTRACT
The article discusses the powers of local authorities and the basis for their increase in
achieving stability in local budget revenues. The possibilities of ensuring the stability of
local budget revenues based on the appointment, definition and implementation of the
competencies of local authorities are substantiated.
Priority strategic directions have been developed for further increasing the financial
independence and responsibility of local governments when applying measures to increase
local budget revenues, ensure sustainable development of territories, as well as a system of
factors that determine the balance of local budgets.
As a result of the study, scientific and practical recommendations were given to expand the
powers of local authorities.

Keywords: local budget, budget balance of local budgets, local budget revenues, local
authorities, powers of local authorities, taxes, tax revenues.

Introduction
At the new stage of economic reforms implemented in the republic, there is a need to improve
the state finance system in terms of content and quality based on the requirements of the time
in order to increase the competitiveness of the national economy and further strengthen
macroeconomic stability.
In the conditions of the market economy, the issues of budget and budget income formation
are important. The socio-economic development of the country and regions, the improvement
of the living conditions of the population, the quality of social protection provided to them,
and the development of the infrastructure of the regions directly depend on the ability of local
government bodies to find solutions to economic issues.
The concept of "budget" literally means an amount of money. "The budget determines the
financial status of a particular entity, the collection of funds, the compatibility of income and
expenses, and the surplus or shortage of funds. In other words, the budget is a balance of

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 monetary income and expenditure, or a form of formation and spending of a fund of funds
intended to finance the tasks and functions of the state and local government"1.
As an economic category, "budget" is a system of financial relations between the state and
other subjects of the economy for the formation, distribution, and spending of funds necessary
for the provision of public services to the populations of the state bodies.
"The state budget appeared at a certain stage of the development of human society, and its
creation is directly related to the creation of the state as a political organization. The main
characteristics of production relations, which belong to the social system of each period,
determine the content of state activity and the budget as a distribution mechanism"2.
There are specific aspects of deepening reforms and improving the management mechanism
of all links of the budget system in the development of a free civil society in the
country. Firstly, to ensure sufficient income for timely and necessary financing of social sector
and economic expenses, secondly, to develop the sectors directly related to the satisfaction of
the first-level needs of the population, thirdly, to encourage entrepreneurial activity and
improve the investment attractiveness of the regions by improving the infrastructure. should
be created.
International practice shows that determining the need for financial resources of the regions is
a very complicated process, and a scientifically acceptable solution to this issue has not yet
been found. In modern conditions, in the conditions of improving inter-budgetary relations,
proportional distribution of taxes between the branches of the budget system, increasing the
level of funding of local budgets of regions, achieving the formation of an additional source of
income of local budgets through the optimal use of the increased part of tax revenues collected
in regions, ensuring the stability of tax revenues of local budgets, local budgets researches are
being conducted within the direction of increasing financial independence.
Comprehensive development of regions on the basis of radical strengthening and
decentralization of the income base of local budgets, strengthening of the financial freedom of
local state authorities, supporting the wide development of small and medium-sized businesses
and entrepreneurship in the regions, creating new jobs and ensuring employment of the
population, and expanding the tax potential due to the rapid development of social
infrastructure is relevant today3.
The low possibility of effectively ensuring the expenses of the local budgets at the expense of
the revenues of the local budgets, in particular, the fact that the local budgets of many regions
cannot fully finance their expenses at the expense of their revenues and the need for various
financial funds from the higher budget, increasing the incomes of the local budgets of these
regions, and ensuring their economic development on this basis, is gaining urgent importance.

1
Пивень Е.В., Бедрачук И.А. "Государственное и муниципальное управление". Учеб. пособие/
Владивосток: Изд-во ВГУЭС, 2008. стр -58.
2
Маликов Т.С, Ҳайдаров Н.Ҳ. Давлат бюджети. ўқув қўлланма.-.: "IQTISOD-MOLIYA", 2007.84-бет.
3
Мейлиев О.Р. Налоговые факторы экономического развития регионов // Экономика и
бизнес:теория и практика. 2017.№5. URL: https://cyberleninka.ru/article/n/nalogovye-faktory-
ekonomicheskogo-razvitiya-regionov.

31
 “At the level of local budgets, the priority tasks of the tax-budget policy are to fundamentally
strengthen the revenue base of local budgets by attaching specific types of taxes and other
mandatory payments to them, removing regional, city, and district budgets from subsidies,
gradually reducing their dependence on high-level budget allocations, and, on the basis of this,
increasing the freedom and responsibility of local state authorities in solving the issues of
socio-economic development of the regions; and to determine additional reserves on a
systematic basis to increase the income of local budgets”4.
The effective local implementation of state policy depends on the economic and financial
capabilities of local government bodies. In our view, the practice of generating revenues for
local budgets under the current conditions is not enough to ensure their complete financial
independence, nor is the activity of local state authorities in increasing revenues for the local
budget5.
It is important to increase the income of local budgets, to further increase the financial
independence and responsibility of local authorities in the application of measures to ensure
the sustainable development of regions, and to develop proposals on this basis.
Outs discusses why some public services are provided by local authorities rather than regional
or national governments and outlines the advantages and disadvantages of providing public
services at the local level.
1. Diversity of demand the local government system allows local residents to choose
different levels of spending on public goods (parks, public safety, education, and libraries). As
local authorities, for example, are able to meet different demands for public goods, they in turn
contribute to increased efficiency.
2. External influences. If the settlement is small and unable to limit the number of
beneficiaries of its spending program, externalities (an increase in benefits) will occur. When
there is a system of local authorities, voters tend to ignore the benefits of non-residents, thus
making inefficient decisions.
3. Scope effect. If economies of scale occur when public goods are provided, production
costs in the system of local authorities will be relatively high6.
The revenues of local budgets and the procedure for their formation have always been
considered relevant research topics.
In particular, according to A. Islamkulov, "local budget income is considered the result of the
distribution of the value of the gross domestic product among the participants in the production
process, on the one hand, and on the other hand, it is a value that serves to form a local monetary
fund"7.

4
Decree of the President of the Republic of Uzbekistan dated December 13, 2017 No. PF-5283 "On
additional measures to increase the financial freedom of local state authorities and to strengthen the
responsibility of tax and financial authorities to ensure the completeness of revenues to local budgets".
www.lex.uz.
5
Мейлиев О.Р. Маҳаллий бюджет даромадларини шакллантиришда солиқларнинг аҳамиятини
ошириш //Молия ва банк иши илмий электрон журнали.–Т.: БМА. – 2020. – №. 3. – С. 297-306.
6
Oates, W.E. Fiscal Federalism. Harcourt Brace Jovanovich, Inc., 1972. 256 р.
7
Исламкулов А.Х. Маҳаллий бюджетлар даромадлари барқарорлигини таъминлаш масалалари.
"Иқтисодиёт ва инновaцион технологиялар" илмий электрон журнали. 2016 й, № 4.

32
 Current financial aspects of ensuring the financial stability of local budgets and increasing the
income of local budgets have been studied in the opinions and comments expressed by the
above economists. Also shown are the factors affecting the stability of local budgets' incomes
and the possibilities of forming the financial mechanism for ensuring the rational use of the
economic potential of the local government bodies.

Table 1 Stages of formation of local budget revenues in our country8

Stages Years Explanation

Revenues are formed on the basis of the Law "On Taxes from Enterprises,
1-stage 1991-1993
Associations and Organizations".

Revenues of local budgets are formed on the basis of the laws "On local state
2-stage 1993-1997
power" and "On local taxes and levies".
Based on the Tax Code of the Republic of Uzbekistan, local taxes and fees are
3-stage 1997-2017
attached to local budgets.
Ensuring the financial independence of local budgets, increasing the tax-
4-stage 2017-2020 budgetary powers of local authorities, and expanding the revenue base of local
budgets.
Based on the law "On the State Budget of the Republic of Uzbekistan", the
5-stage 2020- etc.
income of local budgets is formed for each year.
Sources of income for local budgets, provision of proportionality of income to expenses, and
measures developed on the basis of regulatory legal documents on achieving financial
independence of local budgets were divided into these stages.
In order to ensure the stability of local budget revenues, first of all, the mechanism of formation
and regulation of local budget revenues, the analysis of the procedure and state of regulation
of local budget revenues, the implementation of comprehensive measures to increase the
economic and financial potential of the country's regions, and the rational use of tax potential
are of great importance.
If we analyze the process of formation of the incomes of local budgets and the dynamics of
changes in recent years, we can see that these incomes have regularly changed in the analyzed
years (Table 2).

Table 2 Dynamics of local budget revenue changes, billion.in soums9

Т/р Regions 2015 y 2016 y 2017 y 2018 y 2019 y 2020 y 2021 y
Republic of
1. 716,7 949,5 1292,2 2241,1 2953,3 2743,9 1869,2
Karakalpakstan
2. Andijan region 928,3 1051,1 1264,8 1709,0 2624,6 2105,9 2418,5
3. Bukhara region 1098,6 1194,8 1335,6 1383,0 2409,5 1782,9 2374,1
4. Jizzakh region 396,2 478,6 715,4 948,3 1240,9 1058,0 1460,4

8
Compiled by the author, based on research
9
It was prepared by the author based on the information of the Ministry of Finance of the Republic of
Uzbekistan and the "Open Budget" portal of the Republic of Uzbekistan.

33
 5. Kashkadarya region 1587,7 1765,0 1786,6 2341,1 3783,9 2468,8 2722,1
6. Navoi region 655,6 776,3 745,3 1217,1 1877,8 1540,9 1948,9
7. Namangan region 753,7 843,0 1032,1 1360,0 2237,8 1763,0 2297,0
8 Samarkand region 1082,4 1304,6 1557,3 1970,8 2567,2 2385,6 3154,7
9. Surkhandarya region 720,0 823,3 1030,3 1378,3 1844,9 1605,7 1993,2
10. Sirdarya region 377,2 460,9 568,5 710,2 816,7 716,5 881,6
11. Tashkent region 1632,3 1817,7 1775,0 1949,3 3721,5 2395,5 3734,1
12. Ferghana region 1681,1 1780,1 2110,9 1833,2 3836,1 2677,3 3665,1
13. Kharazm region 683,9 731,5 881,4 1106,3 1467,3 1302,7 1743,1
14. Tashkent city 2151,0 2326,2 2440,9 2796,4 3752,8 3156,3 4911,4
Total 14464,7 16302,6 18536,3 22944,3 35134,2 27702,9 35173,4

From the data in the table, we can see that in the analyzed years, the incomes of the local
budgets of the regions had a tendency to increase.
In 2015, the implementation of local budget revenues amounted to 14,464.7 billion soums; in
2016, it was 16,302.6 billion soums; and in 2017, it was 18,536.3 billion soums. By 2018, the
actual revenue of local budgets amounted to 22944.3 billion soums, and the plan indicators
were fulfilled by 124.3%. As a result of changes made to the approved forecast indicators for
2018 during the year, i.e., in the I–IV quarters, the annual forecast revenues were reduced by
308.3 billion soums in 3 regions and increased by the same amount in 4 regions, i.e.,
redistributed by regions. In particular, the annual forecast indicators of income were reduced
to 170.3 billion soums in the Bukhara region, 95.0 billion soums in Tashkent, and 43.0 billion
soums in the Republic of Karakalpakstan. It was also increased by 68.0 billion soums in the
Tashkent region, 37.1 billion soums in the Surkhandarya region, 24.4 billion soums in the
Namangan region, 17.0 billion soums in the Jizzakh region, and 161.8 billion soums on receipts
controlled by the State Tax Committee. By 2019, the implementation of local budget revenues
amounted to 35,134.2 billion soums, and the plan indicators were fulfilled by 117.7%. In the
period from January 1 to September 30, 2022, the amount of tax revenues in the republic
increased by 17.3 percent compared to the same period last year.
In particular, in Ferghana (39.5 percent), Samarkand (35.4 percent), Syrdarya (33.2 percent),
Khorezm (32.7 percent), Bukhara (32.2 percent), the Republic of Karakalpakstan (33.4
percent), and Tashkent (42.2 percent), a significant increase in tax revenues was noted. A
number of growth factors influenced the increase in tax revenues during this period.
Due to the expansion of the introduction of the electronic account system and the online cash
register system, as well as the introduction of the procedure for returning 1% of the purchase
price to the population as a cashback, a 32% increase in value-added tax revenues and a 49%
increase in turnover tax were achieved. The increase in economic activity and profitability led
to a 38 percent increase in income from corporate income tax.
During the analyzed period, 70,563 new economic entities were established, and most of them
were registered in Samarkand (8,398), Kashkadarya (6,812), Fergana (6,720), Tashkent
(5,212), Khorezm (4,567), and Tashkent city (11,700).
Paragraph 34, D-subparagraph, of the Decision of the President of the Republic of Uzbekistan
No. PQ-4086 dated December 26, 2018, authorizes the redistribution of the missing amount of
expenses to the Councils of People's Deputies of the Republic of Karakalpakstan, the regions,

34
 and the Councils of People's Deputies of the Republic of Karakalpakstan, and the surplus
income formed in the planning of the budgets of individual districts and cities between the
budget levels authorized. As a result, in 2019, in accordance with the decisions of regional
councils of people's deputies and local authorities, 60.0 billion soums were allocated in the
Navoi region, 26.0 billion soums in the Samarkand region, 42.8 billion soums in the
Surkhandarya region, 60.0 billion soums in the Tashkent region, and 73.0 billion soums in
Tashkent city. Revenues and expenses in local budgets increased by 9 billion soums. In 2020,
the revenues of local budgets actually amounted to 27,702.9 billion soums, and in 2021, they
amounted to 35,173.4 billion soums.
Revenues from local budgets are the main source of financial support for local government
bodies. Local self-governing bodies are tasked with increasing the revenues of local budgets
and spending them economically.
Local budgets are factors that determine the budget balance

Internal factors

Tax and tax-free Local Promote Development of Attracting

income collection government tax economic small and resources to the
opportunities policy development medium regional economy
businesses

Increase the Quality of work Encourage tax Create a positive Efficient use of
collection of tax and of tax authorities authorities attitude towards city(district)
tax-free income tax obligations property

Identify reliable Budget planning Planned Obtaining reliable Focus resources

sources of budget quality and qualification of information on priority areas
parameters methodological employees of necessary for
support budgetary budget

External factors

Distribution of tax Tax policy of Tax policy of the Budget policy of Budget policy of
revenues between the state country’s subjects the state the country’s
budget levels subjects

Redistribution of Mechanism for Improving inter- Adoption and Determining the

income between allocation of governmental implementation of size of local
budget revenues local development budget
inter- budgetary relations
expenditures
transfers programs

Legal determination of issues of local importance Determining the powers of local government
bodies
Fig 1. System of factors determining the budget balance of local budgets10

10
Compiled by the author, based on research

35
 Nowadays, the following are significant variables influencing how balanced local government
budgets are:
• the consolidation of obligations for expenditures that are not covered by revenues,
• the poor management and application of tax-budget strategy,
• it is possible to mention the lack of focus on boosting the tax potential of districts.
Although taxes and fees allocated to local budgets are a significant source of revenue for
regional budgets, the majority of them are created through tax deductions divided among the
budgets of the budget system. The local budget's subordination to the higher budget
demonstrates that the taxes and fees set aside for local budgets are insufficient to cover costs
and, more crucially, restricts the tax-budgetary rights of local authorities.
In our opinion, there are currently a number of problems in achieving the regulation and
stability of local budget revenues and their management by local authorities. For example, the
main part of local budget revenues is formed through inter-budget regulation channels on the
basis of the norms of deductions from republican taxes, the norms of which are revised every
year. But these norms change every year and are unstable. This instability leads to huge
differences in per capita budget revenues among regions, depending on the way taxes are
distributed in practice. In our opinion, the current procedure of allocating transfers from the
higher budget does not encourage the donor regions to increase their tax capacity and does not
arouse the interest of the subsidy recipients to increase their income and taxes.
Another issue is that today's process of inter-budget regulation ensures the formation of the
majority of revenues for local budgets. The large amount of these revenues (that is, taxes and
financial assistance) affects the lack of responsibility of the local authorities, and in our
opinion, this situation is not compatible with today's economic liberalization policy.
It is known that the financial stability of economic entities ensures the continuity of state
budget revenues. For this reason, it is appropriate to form a reasonable mechanism between
the activities of economic entities and the state that should reflect the interests of the state
budget and the interests of economic entities. First of all, this can be achieved only by keeping
the tax burden and other means of influence on the activities of economic entities at a moderate
level. In the conditions of a market economy, the need for a certain level of state intervention
in the economy does not always allow for these standards to be followed.
There are sectors of the economy where investing in these sectors does not bring enough
benefits to the investors. In such cases, the state budget—or its finances, more precisely—
influences through taxes, i.e., lowers the level of taxation or finances these sectors, gives
subsidies, invests, etc., and the need arises for the state to intervene in the economy and regulate
it. In this case, the state tries to influence demand or supply, foreign trade turnover, inflation,
consumption, and divert investments in the necessary direction through means of management.

References
1. Decree of the President of the Republic of Uzbekistan dated December 13, 2017 No. PF-
5283 "On additional measures to increase the financial freedom of local state authorities,
to strengthen the responsibility of tax and financial authorities to ensure the completeness
of revenues to local budgets"

36
 2. Пивень Е.В., Бедрачук И.А. “Государственное и муниципальное управление”. Учеб.
пособие/ Владивосток: Изд-во ВГУЭС, 2008. стр -58.
3. Маликов Т.С, Ҳайдаров Н.Ҳ. Давлат бюджети. Ўқув қўлланма.-Т.: “IQTISOD-
MOLIYA”, 2007.84-бет.
4. Oates W.E. Fiscal Federalism. Harcourt Brace Jovanovich,Inc.,1972.256 р.
5. Исламкулов А.Х. Маҳаллий бюджетлар даромадлари барқарорлигини таъминлаш
масалалари. “Иқтисодиёт ва инновaцион технологиялар” илмий электрон журнали.
2016 й, № 4.
6. Мейлиев О.Р. Налоговые факторы экономического развития регионов // Экономика
и бизнес: теория и практика.2017.№5.URL:
https://cyberleninka.ru/article/n/nalogovye-faktory-ekonomicheskogo-razvitiya-regionov
7. Мейлиев О.Р. Маҳаллий бюджет даромадларини шакллантиришда солиқларнинг
аҳамиятини ошириш //Молия ва банк иши илмий электрон журнали.–Т.: БМА. –
2020. – №. 3. – С. 297-306.
8. Information from the Ministry of Finance of the Republic of Uzbekistan
9. Information from the Republic of Uzbekistan's "Open Budget" portal
10. https://review.uz/oz/post/ekspert-ceir-obyasnili-s-chem-svyazan-rost-biznes -aktivnosti-
regionov-Uzbekistana.

37