Local authority tax policy in Poland: Evidence from the Union of Polish metropolises

Local taxes and the related taxing power are significant determinants of public authority decentralization. Local taxes should primarily serve as an effective source of self-government revenues. Therefore, it is extremely important to identify and comprehend the motives and behaviors of self-government authorities with regard to local taxes. This work focuses on real property tax, the most efficient of all local taxes. Importantly, in Poland, the system of real property taxation is based on the area of the given property and not on its value. The present work is based on two sources: official data derived from budget reports and reports from town council meetings during which tax resolutions were made. The spatial scope of the analysis covers 12 largest Polish cities - members of the Union of Polish Metropolises (UMP). The article is aimed at the comprehension of ways in which town self-governments make use of opportunities created by the current legal framework in Poland. Therefore, through the use of the correlation testing methods (Pearson's correlation (r) and Spearman's correlation) the article attempts to determine the impact of a reduction in rates on the volume of budget revenues and to explain the statistical diversification of real property tax rates. It presents econometric models illustrating the financial effects of town tax authority on real property taxes. The results of the empirical study reveal diversity in the tax policies of large cities. The observed differences can to some extent be explained by the size and wealth of a city. Furthermore, the results confirm that tax policy influences city income but that consequences of the policies change significantly over time.