Personal income tax (PIT) is the foundation of local budgets, accounting for up to two thirds of all tax revenues. It determines the quality of services residents receive, the condition of infrastructure, and the pace of local economic development. Yet the paradox is that this tax often does not go to the place where a person lives, votes, and receives services.
In the publication “Where Should PIT Be Allocated? Why Ukraine Can No Longer Delay This Reform”, Polaris Programme experts Ihor Herasymchuk and Ihor Onyshchuk bring together eight years of expert discussion, more than 15 draft laws, as well as research and analysis by think tanks and international partners. The result is a comprehensive publication that presents the issue of PIT allocation in a clear, structured, and accessible way.
Several figures help illustrate the broader context for implementing change:
- 65% of hromada residents report population decline in their areas; at the same time, most people plan to remain where they live, despite an average life satisfaction score of 6 out of 10 (according to data from the ZMINA Policy Analysis Centre, March 2026).
- 70–80% of hromadas would strengthen their revenue base under a PIT allocation model based on the taxpayer’s place of residence or registration (modelling conducted by Polaris, U-LEAD with Europe, and the Ukrainian Centre for Social Reforms, 2023–2024).
- 76% of Ukrainians are ready to accept difficult reforms for the sake of the country’s European future, even if these reforms temporarily worsen socio-economic conditions (research by the Westminster Foundation for Democracy in cooperation with Rating Group, January 2026).
Demographic, social, and resource-related factors all point to the same conclusion: the everyday quality of life in a hromada depends on where the taxes paid by its residents are directed.
The publication compares five models of PIT allocation, analyses the risks and advantages of each, and outlines a roadmap for transition. It also examines the background of the issue, analytics provided by international partners, the horizontal equalisation system, as well as compensation mechanisms for hromadas that may temporarily lose part of their revenues.
