Local government finances will change
Local government finances are regulated by the Law of 13 November 2003 on Revenues of Local Government Units, which has been in force for over 20 years. (LGU). According to the authors of the amendments, “The constantly changing socio-economic and legal environment means that this system requires adaptation to current realities” and, as they emphasize in the justification for the proposed amendment, “The amendment has been requested for many years by the scientific community and, in particular, by the local government units themselves, who are calling for appropriate reforms. In fact, there are more and more voices indicating that local government finances are not in good shape.
– The last few years for most local governments were lean years. It is worth noting that local government territorial, although it is a tool for decentralizing power, is not an organ foreign to the State. Several antagonistic actions undertaken in recent years, putting the State at risk local government in opposition, were therefore incomprehensible. For local government territorial function has functioned well in its role, it needs independence. It cannot be ensured by increasing the flow of own income – explains Dr. Patryk Kuzior, assistant professor at the WSB University in Dąbrowa Górnicza, in an interview with “Gazeta Prawna”.
Expert: “The state uses economic violence against local government”
According to Dr. Kuzior, urgent changes are needed because the state’s approach to… local government territorial violence is nothing more than economic violence.
– To illustrate this problem, state and local government can be compared to a marriage. In a good, healthy relationship, there is partnership, and when it is lacking, relationships deteriorate. By today’s standards, a husband who controls the family finances with an iron fist and gives his wife money, giving her less than she needs to cover the household’s needs, would be using economic violence. So what can we say about a government that cuts local government revenues and at the same time adds tasks or makes decisions that cost the local government more, without providing adequate compensation, as was the case with the teacher salary increases? Given this situation, it is not surprising that local government organizations are lobbying the government to change the principles of local government funding. – observes Dr.
Local government finance reform
The recipe for repairing local government finances will be the draft revenue bill prepared by the Ministry of Finance local government units. Due to the proposed changes, local government revenues next year will increase by almost PLN 25 billion compared to current regulations.
Important
“Over the next 10 years, local government revenues will increase by more than PLN 345 billion. In addition, new solutions will restore transparency to the local government revenue system and ensure its apolitical nature. The income of local communities will be based on objective parameters, measurable through statistical data,” reads the website of the Chancellery of the President. Council of Ministers (Chancellery of the Prime Minister).
Local government finances in 2019-2022
According to the authors of the proposal for reforming local government finances, the changes to the tax system carried out in 2019-2022 had a significant impact on the level of own income. local government unitbut it’s not quite like that local governments was about. “The solutions used to supplement the financial resources of local government units have not led to stability, transparency and predictability of financial management by local governments.. As a result, local governments did not know what support they could count on in a given year, which had a negative impact on the realistic nature of budgets and long-term financial forecasts. local government unit“- we read in the justification of the bill.
– Over the past five years, we have seen that if there were no changes in personal income tax, revenues increased. In 2020, we had a tax reduction from 18 percent to 17 percent, or rather from 17.75 percent to 17 percent, because the tax reduction was already in effect in the fourth quarter of 2020. The year 2022 will bring changes to the Polish Order. Revenues have not decreased, but there has been no significant increase, which is certainly not in line with the increase, for example, in wages. The Polish Order was amended during the year, resulting in historic tax refunds for 2022 and 2023. Taxpayers overpaid tax but had to wait until the following year for their refund. Refunds amounted to over PLN 27 billion. The effect? Almost PLN 16 billion less for local government units in 2023.– lists Piotr Juszczyk, Chief Tax Advisor at inFakt.
Increase in revenues of each local government from 4 to 12 percent.
As the authors of the reform argue, the changes will allow the introduction into the legal system of regulations that guarantee a stable financing system. local government unit. “Thanks to the reform, there will be a qualitative change in the structure of local government budget revenues. By 2025, local government revenues will increase by PLN 24.8 billion compared to the current system,” we read on the website of the Prime Minister’s Office.. According to calculations by the project authors, the increase in revenues for each local government should range from 4 to 12 percent.
What are the most important assumptions of the local government financial reform project?
The most important changes proposed in the bill on local government revenues:
- local government revenues from participation in personal income tax and corporate income tax will be largely independent of general tax changes,
- parts of the general subsidy to local governments will be replaced by financial needs. These will be compensatory needs – taking into account, in addition to the current income disproportions, also the differences in expenditure between local governments, as well as educational, development, ecological and supplementary needs,
- The increase in personal income tax and corporate income tax, as well as a general subsidy, totaling approximately PLN 250 billion, are intended to cover the financial needs of local governments, including, among others: educational needs of approximately PLN 103 billion (approximately PLN 8 billion more), development needs PLN 8.6 billion and ecological needs – almost PLN 1.5 billion,
- in accordance with the idea of self-government, the general budget subsidy will be of a complementary nature,
- changes will be introduced regarding the so-called janosikowy, i.e. a system of payments to the state budget made by local governments that have above-average incomes. The project assumes uniform parameters for all categories that identify local governments with above-average incomes, and additionally, expenditures in the budgets of local governments will be eliminated, because the adjustment for wealth will be made by reducing personal income tax and corporate income tax revenues.
