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Personal and Corporate Income Taxes
Local Government Organization and Finance: Poland 323
TABLE 9.6 Shares ofLocal Governments in Revenues from Personal and Corporate Income Taxes (percent)
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Personal income tax Corporate income tax
Level ofgovernment 1999–2003 Since 2004 1999–2003 Since 2004
Municipality 27.6 39.34 5.0 6.71 County 1.0 10.25 0 1.40 Region 1.5 1.60 0.5 15.90
Source: Author’s calculations based on financial reports oflocal governments.
A few features ofthe tax-sharing system are worth stressing.These features distinguish it from tax-sharing systems in several other transition countries:
There is no territorial redistribution mechanism;that is,shares feed the budgets oflocal governments on whose territory the tax has been collected.A horizontal redistribution mechanism was in place for allocating personal income tax shares at the beginning ofthe 1990s,but it was liquidated in 1998.9 Unlike in some other countries in Central and Eastern Europe,the personal income tax is residence based (that is,it goes not to the jurisdiction in which one is employed but to the one in which one lives).It is paid by the vast majority ofthe adult population,regardless ofwhether they are paid workers,pensioners,or self-employed.Private farmers constitute the only large group that is exempt from personal income tax. The share that each tier oflocal government gets is decided in the Law onLocal Government Revenues.Shares have been relatively stable for several years and are not subject to decisions made under the annual budget law. In theory,the corporate income tax is a poor candidate for local government revenue,because it is often difficult to determine which authority is entitled to the yield exacted from each taxpayer.10 Many companies have branches in various regions,or their headquarters may be located in a different jurisdiction than that in which goods or services are actually produced.Hence,when an enterprise has activity in many localities, revenue from corporate income tax is shared among those localities in a way that is proportionate to the number ofpeople employed in each jurisdiction.
