Governments,2004

Local Government Organization and Finance: Poland 315

TABLE 9.3 Structure ofRevenues in Different Types ofLocal Governments, 2004

Counties Municipal government (excluding cities Cities with Other Rural with county Type ofrevenue county status cities municipalities status) Regions

Total (Zl million) 32,179.7 22,783.1 17,524.8 12,554.7 37,04.6 Own source (%) 35.4 38.6 26.6 11.7 2.3 Property tax (%) 13.8 18.6 13.1 n.a. n.a. Shares in central taxes (%) 27.5 18.7 9.8 11.1 55.9 General grants (%) 23.6 28.1 48.2 49.5 18.1 Conditional grants (%) 13.5 14.5 15.4 27.7 23.7

Source: Author’s calculations based on financial reports oflocal governments. Note: n.a. = not applicable. Local government revenues do not include (a) most fees and charges for local services, which are collected by budgetary enterprises or other service delivery units, and (b) local borrowing and privatization ofmunicipal assets, which are accounted as “sources to cover budget deficit, defined as total expenditures—total revenues” (Law on Public Finance).

As shown in table 9.3,in small rural governments,the local tax base is usually weaker,while in midsize towns and cities,the largest proportion of the total budget comes from own-source revenues.Property tax is the only important source ofrevenue.Tax on agriculture brings significant revenues, but only in rural areas (almost 4 percent oftotal revenues).All remaining local taxes make up insignificant shares in local budgets,usually less than 1percent.(Tax on civil legal activities,which has a 1.4 percent share in total revenues,is an exception,but tax on vehicles brings in only 0.7 percent of revenues,and all other local taxes are less than 0.5 percent.)

Compared with the situation in most other European countries, property tax revenues in Poland constitute a significant proportion ofGDP (close to 1percent).Although the share is considerably lower than in France, Spain,and the United Kingdom (especially ifwe include U.K.revenues from nondomestic rates,which do not constitute a local government tax),it is much higher than in most other European countries.It is more than twice as high as the share in the Czech Republic and about three times higher than in Hungary.

The importance ofproperty tax is greatest in midsize cities;it is muchless important in rural communities—especially the smallest ones (see table 9.3). The relatively low significance ofproperty tax in the budgets ofthe largest cities (cities with county status) is a result ofthe strong domination ofstate grants in county revenues.