by Size ofLocal Government,2000

316 Pawel Swianiewicz

TABLE 9.4 Revenues from Physical Persons and Legal Entities, by Size ofLocal Government, 2000 (percentage ofrevenues)

Number ofinhabitants

Fewer 5,000– 10,000– 20,000– 50,000– More than Source ofrevenues than 5,000 10,000 20,000 50,000 100,000 100,000

Individual taxpayers 30 34 32 24 20 16 Legal entities 70 66 68 76 80 84

Source: Author’s calculations based on financial reports oflocal governments.

Which categories ofproperties contribute to budget revenues in the most significant way? Unfortunately,we do not have precise information on revenues from housing properties,plots used for commercial activities,and commercial buildings.But we can make some estimations from data on revenues from physical persons (individuals) and from legal entities.The information is not precise because many small firms operate as physical persons, without legal entity status.But with a risk ofsome simplification,we may say that revenues from legal entities represent property tax paid on commercial activity,whereas revenues from physical persons represent property tax paid on buildings used for housing and on empty plots ofland allocated for housing purposes.Ifwe take into account the structure ofproperty tax rates,it should not be surprising that the dominant share—about 80 percent ofthe total tax yield—ofrevenues comes from legal entities (that is,from properties used for commercial activities).

Revenues from legal entities are especially important in big cities, whereas in small communities revenues from individual taxpayers play a more significant role (table 9.4).

Local Tax Policies

In general,local governments may express their local tax policies in three different ways:

1.They can set local tax rates,within limits decided in the central legislation. 2.They can grant tax exemptions to certain categories oftaxpayers,other than those listed in tax exemptions decided in the central legislation. 3.The local mayor can grant individual tax releases or reductions to individual taxpayers.