The article reveals the prospects for the transformation of the tax system in an unstable environment and their potential impact on the tax revenues of local budgets. The options for tax reform in Ukraine in terms of personal income tax on wages and its possible impact on tax revenues of territorial communities during the war and after its end are assessed. These include the “10-10-10” tax reform (provides for a reduction in the personal income tax rate); “total” taxation (provides for personal income taxation of all citizens of working age regardless of the amount and source of their income); the wealthy pay more (provides for the introduction of a progressive scale of personal income tax rates to increase the tax burden on wealthier citizens). The author emphasizes that none of the considered options for tax reform in terms of personal income tax is possible and appropriate to be implemented in the short term since in order to increase tax revenues to budgets of various levels, a number of measures should be taken that will make it impossible to minimize tax liabilities. In particular, the “10-10-10” version of the tax reform may lead to a decrease in the financial capacity of territorial communities after the "loss" of military personal income tax revenues to local budgets. Therefore, the introduction of this option during martial law in the country and in the short term after its termination is inappropriate. The second option of the tax reform – “total” taxation - can lead to significant social unrest due to the total pressure to pay taxes even if a person is not working. Therefore, the implementation of this version of the tax reform both during the war and after its end is unrealistic. The third option for tax reform – the wealthy pay more – could lead to the risk of increased shadow economy (e.g. in the employment sector – payment of part of the salary “in an envelope” to minimize tax liabilities) if changes are introduced in the personal income tax during the war or immediately after its end without taking measures to prevent tax evasion. As a result, this will not contribute to the growth of PIT revenues to the budgets of territorial communities. The article argues that in the medium term, given the increase in tax revenues to the budgets of territorial communities from personal income tax on wages, the most realistic option for reforming the PIT rate scale after the end of the war is the introduction of a progressive scale of PIT rates. 

tax reform, tax system, PIT, local budgets, territorial community, revenues