WAYS TO MITIGATE TERRITORIAL DISPARITIES IN THE FORMATION OF A FISCAL ENVIRONMENT FOR STIMULATING ENTREPRENEURIAL ACTIVITY IN UKRAINE

Abstract

The article provides a theoretical substantiation and develops practical recommendations for leveling territorial disparities in community development by forming a stimulating fiscal environment to activate entrepreneurship in the context of post-war recovery and institutional instability in Ukraine. A comprehensive analysis of the current state of territorial disparities in Ukraine, which have significantly deepened due to military aggression, has been conducted. It is proven that the existing horizontal financial equalization system, based primarily on Personal Income Tax (PIT), does not fully incentivize communities to develop their own economic potential. The necessity of applying a place-based approach to the formation of the fiscal environment is substantiated. The research results allowed for the formulation of key directions for leveling disparities across various types of territories. For recovery territories, the introduction of special legal business regimes, war risk insurance, and the implementation of low-cost projects based on circular economy principles are proposed. For territories with special development conditions (border, mountainous, coal-mining), emphasis is placed on the importance of curbing emigration through social infrastructure development, supporting micro-entrepreneurship, and implementing “just transition” mechanisms. Particular attention is paid to regional growth poles, which should become a source of innovation diffusion for adjacent communities through transport logistics development and joint inter-municipal projects. The scientific novelty of the study lies in the improvement of financial equalization mechanisms, specifically through the proposal to transition to an equalization model based on aggregate tax potential and changing the principle of PIT allocation to the taxpayer’s place of residence. The practical significance of the obtained results lies in the possibility of their application by state and local government authorities when adjusting regional development strategies and modernizing fiscal tools to support business under martial law and the reconstruction period.