Why Do Some Pay More? Determinants of Municipal Property Tax Rates in Poland
Why Do Some Pay More? Determinants of Municipal Property Tax Rates in Poland

Summary/Abstract: Theoretical background: Due to its fiscal efficiency and the relatively broad tax authority granted to municipal authorities, property tax is an important source of own revenue for municipalities in Poland. The literature considers this tax both in terms of its function and as a tool of local tax policy. The freedom to set municipal rates within statutory limits makes it an important instrument for influencing local economic conditions. The literature has identified factors influencing the variation in tax rates in previous years. In the article, the determinants of rate variation are analyzed in such terms as geographical location, regional development, subject of taxation and the crisis sparked by the COVID-19 pandemic. The article is part of this line of analysis, attempting to identify the factors influencing local tax decisions in the years 2018–2025. Purpose of the article: The authors aim to identify the factors influencing the diversity of municipal tax policy in the area of property tax in the years 2018–2025. Research method: The literature on the subject was reviewed critically. The study took into account such determinants of rates as the municipality's location in the province (voivodeship), the type of taxable object, economic conditions, and the wealth of the province. The empirical study covered all municipalities in Poland. The source data were obtained from municipal Rb-PDP budget reports aggregated in the Ministry of Finance's SP-1 database for the years 2018–2025. Main findings: It was confirmed that legal, geographical, historical and economic factors influence municipal tax policy. Currently, there is still a variation in municipal tax policy according to geographical criteria, i.e. across provinces. At the same time, the lowest tax rates were observed in provinces located in the former Russian and Austrian partitions, whereas the highest rates were identified in the areas of the former Prussian partition. We can thus speak of a historically established shape of municipal policy regarding property taxation. In addition, it has been found that the level of tax rates on residential buildings is determined by the wealth of the province, measured by the region's GDP. In some provinces, the level of property tax rates on flats also correlates with the level of wealth of the inhabitants. A moderate correlation was also observed between the inflation rate used to prepare the draft state budget and the level of tax rates on selected taxable items.

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