It was organized under the auspices of the Ministry of Finance and co-hosted by the European Property Institute. The conference was dedicated to a review of international property taxation systems, which, almost universally, serve the purpose of generating revenues for local governments. In the era of decentralization of public finance and growing local infrastructure expenditures in the quickly urbanizing world, the property tax is assuming growing importance. The share of revenues generated from this source varies considerably from country to country, much like the respective property tax bases, which can reflect either property capital values, annual rental values or useable floor and/or land areas. The overall tendency is to make this tax increasingly market-calibrated, so that the actual sharing of the tax burden is more closely related to taxpayers’ property wealth, as reflected by economic attributes of real estate. Property tax administration is as a rule devolved to local governments; however, in case of small or weak municipalities this function is delegated to higher-level local governments. The tax rate policy is typically left at the discretion of local governments subject to regulations imposed by the national legislation.

The property tax generates relatively high revenues to local governments in Poland, but the rate structure is much different from the international experience. There are no market calibration mechanisms, and non-residential (business) rates are over thirty times higher than those for residential properties. Hence, in reality, Poland’s property tax resembles a corporate asset tax and discriminates businesses using large floor space (mostly manufacturing-related). Ridiculously low land tax rates and residential property rates contribute to high residential housing and land prices, including an “incentive” for land speculation. One could consider in Poland a number of market-calibration options drawing from the international experience, that would help modernize the archaic property tax structure, but the political economic apprehension against the so called „cadastral (ad valorem) tax” feeds the „conspiracy of silence” among most political classes. However, the growing investment needs of the local governments and the diminishing sources of budgetary income from privatization will sooner or later force a considerable modification of the property tax system in Poland.

Władysław J. Brzeski
Member of the Board of the European Property Institute Foundation
Source: Property Jornal Polska Giełda Nieruchomości 12-01/10