Download Decentralization Processes of Local Government Sector in Poland

DECENTRALIZATION PROCESSES OF LOCAL GOVERNMENT SECTOR IN
POLAND
Iwona Otola1
Abstract:
Describing the process of public sector decentralization is a aim of the article. Increasing the responsibility and
competence of local government units is aimed at a taken of decentralization process of the sector of the public
finance. Thanks to granted competence, the local authority together with the community take decisions
concerning the path of the development of given local government unit. In the article tasks and competence of
government units on different level were discussed. Also critically, issues connected with financial resources of
local government units and the connection of these resources with the expenses side were presented.
I. Decentralization - the Notion and the Nature
In the majority of countries with are members of the European Union a phenomenon of the progressing
decentralization of public authorities is observed and a process of creating and strengthening regions is one of
the most dynamic elements of this decentralization. The decentralization of the public sector which is a complex
process is supposed to lead to effective and rational managing with public means. The decentralization is
perceived as the process of handing decision-making rights over into the lower part of organizational hierarchy,
while the centralization consists getting rights back from the lower level and situating of them on levels higher
and highest (Czerminski et all. 2002). It is worthwhile in this place quoting the definition given to the
decentralization through Oates, according to which the common goods should be fulfilled by this level of the
government which is most appropriate with representative of the community profiting from services delivered to
it (Oates 1972). About the need of the decentralization also a subsidiarity principle of European Union tells.
According to this principle, the responsibility for taking action should be on the lowest administrative level.
Handing over the greater responsibility to the local authority is perceived as the road to breaking the kept
inspection through the central planning and the mismanagement, thwarting attempts of poorer nations for
establishing the own path of the growth (Oates 2001). And so the decentralization is a mechanism allowing for
the development of the policy which in the greater degree reflects local needs and involves the community in the
process of democratic governing.
Considering essence of the decentralization one should mention multifaceted character of this phenomenon. The
full decentralization should be examined in three dimensions and include the political, administrative and
financial decentralization. Political decentralization consists in equipping units of the local government with
democratically chosen representative organs and such a public-legal status which provides with the political
independence from state (Ruskowski 2004). Granting the local government units of appropriate competence as
well as instruments for the accomplishment of these tasks means the administrative decentralization. Financial
decentralization, called also a fiscal decentralization, means equipping of the local government units with
appropriate, public financial resources and handing the control over to them for administering these sources. In
the literature on the subject the financial decentralization is often identified with the decentralization of the
public finance.
A. Potoczek thinks, that three main mechanisms of the political and territorial realization of the implemented
reform in Poland are (Potoczek 2001):

decentralization - understood as statutory handing over competence and tasks on the government
administration to organs of the local government;

delegation -determined as moving rights and tasks to units of the lower level as part of the government
administration and by analogy as part of the local government;

the deconcentration - comprehended as excluding certain matters from the regulation of the public
administration and handing over them to nongovernmental institutions.
The local government acts for needs of the local communities and on the level of the local communities is
connected with such notions as decentralization, democracy, autonomy, independence and deconcentration.
Amongst mentioned notions, decentralization is the widest and containing remained. Although one should
notice, that term decentralization isn't in the literature on the subject defined explicitly. In the dynamic
expression, decentralization means handing over of tasks and funds of their accomplishment from higher to
lower organizational units, while static expression of this term means the status equipments of lower than central
organizational levels into tasks and funds of their realization (Ruskowski 2004).
According to N. Gajl the decentralization should cover at least three problems (Gajl 1993):
1. handing over determined tasks and competence to local bodies by the central stage;
1
Department of Logistics and International Management, Faculty of Management, Czestochowa University of
Technology, Czestochowa, Poland
2. using by local bodies the appropriate property and legal rights, guaranteeing their independence and the
possibility of deciding matters of the land;
3. having by local bodies appropriate financial means with aim of the realization of the own policy.
S. Owsiak pays attention that in deliberations above the decentralization of the public finance one should
consider the following problems (Owsiak 1999):
1. division of competence, duties and tasks between the local and state authorities;
2. determining the scope of the tax control according to individual levels of public authorities;
3. presenting principles of the financial power supply for individual levels of public authorities.
The term delegation covers mainly technical aspects of dispersing tasks delegated to lower, specialist levels of
managing. Delegation leads for delegating determined tasks to stages, on which these tasks can be effectively
realized. Its aim is to reduce the bureaucratization of managing, to bring closer to the local community the task
as well as to lower costs of administration.
In the literature on the subject at decentralization targets counts (Zeman – Miszewska 1996, Swianiewicz 2002,
Owsiak 1999):
 effectiveness of managing public means;
 guarantee of the financial independence of individual units of the local government;
 putting in order territorial organization of country;
 building bases for developing by civil;
 adapting the public measure to tasks of local government units granted them by the Constitution and acts;
 necessity to adapt Polish territorial structures for standards of the European Union, in the context of using
mechanisms worked out by it of supporting local initiatives and supra-border cooperation.
II. PLACE OF LOCAL GOVERNMENT IN THE PUBLIC SECTOR
Fulfilling needs in a public sphere is a duty of state and local government. It extorts, appropriate activity of both
state and local government in the field of economics, consisting in expending and collecting financial means.
This activity is an object of the public financial economy.
The activity of the public finance as the instrument of the state depends on historical conditioning, but first of all
from social and economic doctrine dominating in the given country and the time (Ziolkowska 2000). The model
of state being in force in the given country has been developed over the centuries. Arisen theories of the public
finance determined the role of the state in the scope of the tax control, expending public revenues or also
fulfilling needs of communities. Public sector in Poland called also the sector of the public finance became
defined in the Act from the day 26 November 1998 on the public finance. To elements of the public sector rank
among others organs of public authorities, organs of the government administration, bodies of the national
control and the protection of the law, courts and tribunals as well as units of local government and their bodies
and associations, earmarked funds, state higher education institutions, scientifically – developmental units and
enterprises belonging to the Treasury, units of local government and their associations.
The division of the public sector according to the legal form allows to distinguish the subjects of the public
sector and organizational units. Subjects of the public sector have the legal personality and function as
independent institutions while organizational units don't have the legal personality and act in the name and for
the account of the public legal person. It is possible to assign institutions of the public sector to state government
sector or to local government sector (Graph 1).
Graph 1
Scheme of Public Sector
Entities of public
sector
State sector





Treasury
High schools
State institutions of culture
Government agencies
State earmarked funds having legal
personality
 National Insurance Institute
 Different state legal person
Local government sector




Units of local government
Associations of local governments units
Local governemnt institutions of culture
Local government earmarked funds
having legal personality
Organizational units
 State budget units
 State budget institutes
 State earmarked funds not having legal
personality
 Office of the Agricultural National
RetirementInsurance
 National Forests
 Different units
Source: Malinowska and Misiag 2002.
 Local government budget units
 Local government budget institutes
 Local government earmarked funds not
having legal personality
Two competing approaches are in a contemporary theory of the local government: - natural – suggesting that the
local government is an inherent part of the community lives and functional which finds that the local government
should exist in such a degree, in which it helps for state, as wholes, better functioning (Swianiewicz 2002). In the
literature on the subject three main principles of the local democracy are mentioned:
1. Freedom (autonomy) – meaning the existence of the local government as protection before the concentration
of political power in one centre and taking all sorts political choices into consideration in different
localnesses;
2. Participation (democracy) – meaning that the existence of the local government lets the community to have a
large shares in the autonomy;
3. Effectiveness - meaning the ability of the local government for more effective delivering of different
services.
The „self-government” notion means a connection of citizens bound with place of living and constituting
autonomous and self - responsible group of businesses, having the own, separate organization and the legal
personality (Zeman – Miszewska 1996). The local government is defined as the chosen locally and by law,
democratic organization below the level of state and the region, providing services of the public sector for the
society in the area of its jurisdiction (Bailey 1999).
Conception of local government is also included in the European Charter of Local Self-Government and denotes
the law and the ability of the local communities, within determined with law, for managing and administering the
fundamental part of public affairs to their own responsibility and in the interest of their inhabitants. Some
authors describe local government as decentralized, not subordinated hierarchically to the central government
part of the public administration, with the own elective legislative and executive authorities (Kosek-Wojnak and
Surowka 2002). Such interpretation of local government leads to singling out it from structures of public
administration, granting municipal property and determining its tasks, competence but first of all own revenues.
Each countries of the European Union chose the different path of the development of local government. It is
possible to distinguish four groups although assigning countries to each of these groups is liable to more further
discussion (OECD 2002):
1. the group of federal countries - the state government tier has constitutionally guaranteed entitlements and the
level of the sovereignty (Austria, Belgium, Germany);
2. group of countries with relatively strong local government which a lot of function was granted for executing
and with a large degree of autonomy (Denmark, Finland, Sweden);
3. group of countries with relatively weak local government, of which functions as well as the autonomy are
limited (Greece, Ireland, Portugal);
4. group of countries in which granted functions or the autonomy for the local government are between
countries with the strong local government represented by the second group and countries with the weak
local government represented by the third group (France, Italy, Luxembourg, the Netherlands, Spain, Great
Britain).
The local government in today's understanding this institution existed and exists in Poland:
 in the II Republic of Poland in years 1918 – 1939;
 directly after II World War 1945 – 1950;
 at present beginning from 1990 year.
In years 1951 - 1990 local government in Poland didn't exist. In exchange national councils of the fundamental
as well as regional level functioned and they were written down into the structure of the organs of state
government. National councils were subordinated to the central administration and executed issued by superior
tasks. However the property of self-government was in hands of the state. The distribution of revenues between
individual levels of the budget was in fact somewhat artificial because all profits were a state revenues
(Sochacka-Krysiak 1995). At that time it wasn't possible to talk about functioning of local government. The
centralized model of national councils didn't notice businesses of the local communities but state business took
into consideration. Also centralizing financial means collected in regions was a weakness of this model and the
anti-effectiveness redistribution of them relying on leveling shares or combining the size of the subsidy with the
cogency of regions, not necessarily appointed by actual advantages of their business activity (Zeman –
Miszewska 1996).
Re-establishing the local government followed in 1990. A dualistic model of administration consisting of the
central and local government tier was formed. The voivodship aimed at executing tasks of government
administration out and didn't get the self-government status. The Act from the day 8 March 1990 on the local
government regarded only a municipality as the basic unit of local government. Since then municipalities have
been equipped with property, have the legal personality and on their own they keep the financial economy on the
basis of every year passed budgets. On 1 January 1999 district (powiat) were introduced as a second tier of local
government and voivodship as a third tier. At present in Poland 16 voivodships function, 308 districts, 65 town
districts (cities on laws of districts- they execute tasks of districts as well as municipalities) and 2489
municipalities. Three-tiers division of the local government means the new formula of the organization and new
principles of financing the all public sector.
According to the author's the local government in Poland from the moment of the reactivation evaluated from the
group of countries with relatively weak local government to the group of countries, being among the strong and
weak local government.
III. COMPETENCE OF THE LOCAL GOVERNMENT
Together with the reform of the administrative system of the country, authorities of local government received
the autonomy and the freedom of making a decision what gives great abilities in steering with local economy.
However the freedom of making a decision concerning the directions of development of local government must
be connected with fulfilling tasks predicted in acts. According to A. Sztando the scope of competences of local
authorities are a set of public affairs which in the statutory way were entrusted for local government (Sztando
1998). Nowadays it is hard to distinguish competences which belong to local bodies and central. Competence
and tasks often interpenetrate.
In the literature on the subject it is possible to meet the view that certain tasks are domain of state, whereas other
belong to activity of the local authorities. To tasks having central character belong tasks connected with the
defense and the national security, the foreign policy, the central administration department, the judiciary and
administration of justice. Public transport or maintenance the cleanness (the waste disposal, the sewage system,
cleaning public places) are counted to typical tasks having local character.
Trying to generalize tasks, it is possible to notice, that municipal, district and voivodship governments carry out
tasks on the scope of:
 public education;
 social welfare;
 health cares;
 cultures;
 pro-family policy;
 of environmental protection and the water management, including flood protections;
 transportation and public roads;
 physical culture and tourism;
 public order and local public security;
 property management;
 maintenance and administration of public utility buildings and facilities;
 promotion;
 cooperation with non-governmental organizations.
In spite of common scope of tasks however it is possible to distinguish exclusive tasks for each tier of local
government (see table 1).
Table 1
Exclusive Tasks of Different Tiers of Local Government
Exclusive tasks of local
Exclusive tasks of district
government
government
Water supply
Agriculture, forestry and inland
Sewage, waste disposal
fishing
Electricity and gas supply
Handicapped supporting
Maintenance of public utility
Geodesy, cartography and the
buildings
cadastre
Municipal housing
Administration architectural Maintenance of market place
building
Exclusive tasks of voivodship
government
Determining the strategy of
voivodship development aiming at
among others stimulating the
economic activity, raising the level
of the competitiveness of
voivodship economy
Carry on the voivodship
Maintenance of public parks
Maintenance of cemeteries
Lightening of local public road
Guaranteeing to execute tasks
determined in acts and competence
of managers of district inspection
and the guard
District centre for the family help
Counteracting the unemployment
development policy, which
consists of among others creating
conditions of the economic
development, supporting the
development of the science of both
technological progress and the
innovation, the maintenance and
the expansion of the social and
technical infrastructure about
regional meaning
Source: author’s based on Ruskowski and Salachna 2007.
Own tasks of the local government can be compulsory or optional tasks. Local government must execute
compulsory tasks, however it can carry out optional tasks if recognizes them as advisable (on account of real
needs and owned funds) (Ruskowski 2004). Municipality can carry out also tasks which are in competence of the
district as well as voivodship on the basis of the agreement with these units. It results from an economic point of
view that determined tasks should be realized by this unit of the local government which is able to carry them
out into the effective way (Borodo 2000). Municipal authorities have best recognizing local needs, therefore,
tasks connected with existential conditions of inhabitants should be realized by the lower tier of the local
government. The most important tasks of municipality are the tasks having local character, of which a direct
recipient is every citizen -inhabitant of described unit of local government (Otola 2003). These tasks consist in
serving about common, property or decision-making character. In competence of the municipality is to assure
for inhabitants the basic services is in the scope of the technical infrastructure, the health care, sport, the
education, the social welfare. Also meaning of remaining action connected with the policy of the development of
the given unit is growing. Commissioned tasks consist mainly in spending administrative decisions, as well as on
activity connected with the social welfare. The difference between commissioned tasks and own tasks consists in
the fact that for the realization of commissioned tasks the local government receives financial means. Nowadays
a way of achieving the revenues by local government, which are assigned for financing the tasks is a crucial
problem for local government.
IV. SOURCES OF FINANCING THE LOCAL GOVERNMENT
Shaping revenues the local government from a point of view of the relation self-government - central authority
leads to single out three models (Ruskowski 2004):
 the model based on the profitable self-sufficiency of local government units which assures the full partition
of the state revenues and local-government;
 model based on total financing of local government by the state, ruling out any sources of own revenues of
these units;
 mixed models, assuming having by the local government own sources of revenues, shared sources of
revenues with state and funding partially local government units by the state.
The system of revenues of local government units in Poland has mixed character. It means that units of local
government administer own revenues besides they receive transfer revenues.
Own revenues are an essential source of revenue of the municipality. Both the Constitution and the European
Charter of Local Self-Government demand that financial resources of every unit of the local government shall
derive from local taxes and charges of which, within the limits of statute, they have the power to determine the
rate. These norms, are fulfilled with respect to the municipality which administers own revenues and has the socalled tax control.
Own revenues constitute the special kind of financial resources of local government units because they
determine real financial possibilities and the economic independence of self-government authorities (Patrzalek
2000). In the structure of own revenues of municipalities the fiscal type of revenues play a significant role. Units
of local government, managing through taxes make a decision concerning rightnesses and justices of imposing
taxes, in order to get revenues donated to serving for the local community.
Division of taxes on the state and local is bound with the subject authorised to imposing and the collection of
taxes. However it is a contractual criterion, because isn't determined in the constant and explicit way which taxes
are state taxes, and which belong to the group of local taxes. In different countries different taxes are assigned to
the state government tier and different to the local government tier. It depends above all on the scope of the
decentralization and decisions of the given country. The tax independence of the local government enables to
conduct the own fiscal policy. However certain limitations exist in this scope. In here numerous central
indicators exist e.g. as for the size of the tax, fixed rates, the kind and the size of tax allowance and possibilities
of tax exemptions (Gajl 1993). Central limitations aim at implementing similar standards into taxing in the scale
of whole country and do not let to considerable disproportions between units of local government.
Taxes and charges, devoted to local governments in hand are not freely shaped by them. The state regulates not
only their kind but also elements of the tax technique connected with calculating them and the collection.
However determining the tax rate is responsibility of a local government, the state is establishing only maximal
and minimal limits of rates. Local government authorities collecting tax have the right to give the tax exemptions
and tax allowance, to remit, to divide into instalments or to abandon the collection of this tax (Zygmunt 2000).
Interesting conception of specifying the levels of the decision-making independence is presented by A. Walasik.
The author proposes following four level of the decision-making independence of the local government (Walasik
1998):
1. Limited interactive decision-making freedom meaning the right to take over revenues from taxes;
2. Limited legislative freedom meaning the right to narrow or to widen technical elements of the tax;
3. Full legislative freedom meaning the right to shape the technical extent of tax;
4. Full economic legislative freedom meaning the right to establish sources of local taxes.
According to the above division the first level of the independence includes such taxes and charges as: a share of
the municipality in CIT and PIT, inheritances and donations tax, tax on civil law transactions, flat rate tax ,
stamp duty. Second degree of the independence of the local authority in the scope of constituting taxes concerns
such taxes as: real property tax, transport vehicle tax, agricultural tax, forest tax, tax on having dogs, local
charge, spa market dues. The third level of the decision-making independence referring to the full legislative
freedom in the case of Polish solutions is possible, although it is more theoretical and rarely applied in practice
solution. Because the full decision-making freedom refers to the self-taxation of inhabitants or payments for
parking vehicles. Amongst mentioned taxes payments for parking vehicles are applied in practice. However the
fourth level of the decision-making independence doesn't appear in the Polish tax system. As mentioned earlier
local taxes and charges aren't interpreted in literature explicitly. It is possible to count among them exclusively
these taxes and charges which constitute the symptom of the tax control of local organs or to treat them widely
embracing all taxes and charges which are based on sources regarded by the law as constants and for an
indefinite period connected with local budgets. Above interpretation of notion of loacl taxes and charges causes
that it is possible to single out two groups of fiscal revenues: sensu largo and sensu stricto. Sensu largo revenues
occur when the local government only has certain tax control or this tax control is fully deserve for central
organs. Sensu stricto revenues are such local taxes and charges on which amount decides local government units.
The implemented tax system in Poland divides mainly taxes on supplying state budget and municipality budget
(see table 2).
Table 2
Percentage Share of Revenues in Local and State Government Budgets
Inheritance and donation tax
Agricultural tax
Personal inxome tax
to 1996
1997
1998
since 1999
since 2004
since 2005
Real property tax
Forest tax
Transport vehicle tax
Tax on having dogs
Tax on games
Coropration Income Tax since 1999
since 2004
Value added tax
Excise duty
Flat rate tax
Tax on civil law transactions
Source: author’s evaluation
Municipality
100
100
15
16
17
27,6
35,72
39,34
100
100
100
100
0
5,0
6,71
0
0
100
100
District
0
0
1,0
8,42
10,25
0
0
0
0
0
0
1,40
0
0
0
0
Budget of
Voivodship
0
0
1,5
1,60
1,60
0
0
0
0
0
0,5
15,90
0
0
0
0
State
0
0
85
84
83
69,9
54,26
48,81
0
0
0
0
100
94,5
75,99
100
100
0
0
The tax control of district and voivodship government units actually doesn't exist. These government units don't
have assigned own financial resources. The district and the voivodship use only income taxation constituting the
state budget revenues.
Act criticised by local government units Act on local government revenues in years 1999 – 2000 and amended
all time till 2003 didn't enable the realization of financial needs of local government units in the sufficiently
degree. The enforced new act on local governments revenues fundamentally changed the division of the income
taxation. Not only budget of the municipality but also budget of the district and voivodship made a profit on it.
This act, enhancing the financial autonomy of individual tier of local government, aim at the more further
decentralization of public means, for which it is a purpose. It is particularly essential from the point of view the
possibility of the absorption of European Union funds by local government units.
Fixing the criteria is an important problem, according to which will be handed over to the given municipality the
share in the personal income tax. The following possibilities exist in this scope. The personal income tax can be
handed over for municipality on which area the given taxpayer lives, or on which area taxpayer (physical person)
makes the work as the worker, or on which area the taxpayer run an independent business (Borodo 2000). The
above method of calculating and functioning of the share of municipality in the personal income tax refers to the
real contribution of taxpayers of the discussed tax inhabited on the area of the given municipality.
In municipalities inhabited by many taxpayers and where amounts of this tax are high this share has essential
meaning as the budget revenue. The similar solution was applied in the case of the corporate income tax. The
share in the income tax from legal persons and organizational units not having the legal personality is designed
for this municipality, on which area the organizational units and legal persons have the seat. If units or
workshops of the given subject are situated on areas of different communities appropriately the calculated share
is designed for every unit of the local government on which these units are. Shares are transferred to individual
budgets of municipality proportionally to the number of people employed on the basis of the contract of
employment. In the situation, when the share in the income taxation increased to the benefit of local
governments, it should extort the competition among local governments for the taxpayer as well as influence for
creating the entrepreneurship by the local authority.
The problems connected with the decentralization consist mainly on unequal spreading revenues in the country.
Deepening disproportions between regions result mainly from the fiscal potential of the given region.
Differences between the size of public means, as units of local government administer, and the needs, are visible
with the entire sharpness between rich areas and the poor (Ziolkowska 2000). Disproportions in the regional
development manifest itself in the unemployment rate and the amount of revenues, equipping into the
infrastructure, in the range of the natural environment condition, the access to capital education and services.
More rich regions aren't willing to hand over their parts of funds for poorer regions. The regional policy of state
is forced by decentralization which is connected with the necessity of compensating transfers for regions with
the low fiscal potential (Pietrzyk 203).
The need to subsidize the local government results both from disproportion in the territorial division of different
sources of revenues, as well as also from diversifying the range of tasks realized by individual units of local
government (Kronberger-Sokołowska 1998). From the state budget both subsidies and grants consist on
transfers. Subsidies and grants are a form of funding form state budget tasks executed by units of local
government. Therefore they are a form of influencing of the state on directions and field of activity carried out
by the local government. In legal articles the subsidy doesn't have the accepted definition. And so it is widely
accepted that subsidies finance own tasks of the local government, and grants are connected with the realization
of concrete task. However it is hard to accept so that the educational subsidy is allocated for the different
purpose than financing tasks connected with the education. Therefore many authors think that the system of the
subsidies and grants for units of local government is unclear. From the time of re-establishing the local
government admitting and calculating both the subsidy and grants was subjected to many changes.
Supporting budgets of local governments but first of all equalizing disproportion between units of local
government are aimed at subsidies. In Poland to year 1998 structures of counting the general subsidy had been
changed. The mechanism of the transfer from the state budget to budget of local government raised a lot of
controversy because generally it didn't take objective elements into consideration in the sufficient degree, so like
e.g. the length of roads, the condition of devices of the technical and social infrastructure (Patrzalek 2000). Z.
Gilowska notices that the subsidy for local government gradually took over functions previously performed by
own tax revenues (Gilowska 2001). Particularly it is visible at compensating for lost income taxes through
subsidies. As the example introduction of the road subsidy can be set, which purpose was to compensate losses
because of reducing the tax on transport means.
Table 3
Percentage Revenues Structure of Local Governments
2000
2001
2002
2003
2004
Total Local Government Revenues
41,7
40,8
41,9
43,5
51,5
- Own revenues
22,7
22,2
21,0
16,4
14,3
- Grants
35,6
37,0
37,1
40,1
34,2
- Subsidies
Municipality Revenues
52,5
52,1
49,6
47,3
48,2
- Own revenues
13,7
11,7
12,2
10,5
12,5
- Grants
33,8
36,2
38,2
42,2
39,3
- Subsidies
District Revenues
7,9
8,6
10,8
11,3
24,9
- Own revenues
44,4
45,1
42,3
32,6
24,3
- Grants
47,7
46,3
47,0
56,1
50,8
- Subsidies
Town on District Law
48,5
47,6
50,5
56,3
64,3
- Own revenues
20,3
19,3
19,0
11,8
11,0
- Grants
31,2
33,1
30,5
32,0
24,8
- Subsidies
Voivodship Revenues
16,0
13,4
15,7
15,9
59,1
- Own revenues
46,2
52,2
48,5
51,1
22,4
- Grants
37,8
34,4
35,8
31,1
18,5
- Subsidies
Source: Data from Financial Statements of State Budget, Ministry of Finance 2001 – 2006.
2005
2006
53,3
15,1
31,6
53,7
16,8
29,5
48,7
16,2
35,1
47,4
20,0
32,6
29,2
22,1
48,7
30,8
23,1
46,1
66,1
10,9
23,0
67,7
11,0
21,3
64,9
16,0
19,1
63,8
14,2
21,9
Data included in the table 3 depicts the situation of revenues of units of the local government. General depiction
of revenues shows that in the space of seven years the share of own revenues in the total revenues rose by 10 per
cent what one should recognize as the positive phenomenon. As far as in 2000 the share of own revenues in the
total revenues didn't exceed the 50%, since the year 2004 such a situation has taken place. Thanks to that the
share of transferred revenues from the state budget i.e. grants and subsidies have been reduced.
Discussing structure of municipality's revenues the decreasing tendency of own revenues should be noticed in
studied years at the simultaneous upturn of the grants. However the share of subsidy in the initial period rose (the
biggest was in 2004) in order next to fall to the starting level. Essential changes in the structure of revenues
appeared in the district and in the voivodship. In the year 2000 the share of transfers from the state budget in the
district amounted to 92.1%, and in year 2006 - 69.2%. Moreover own revenues increased from almost 8% to the
level of 30%. Even better the situation presents in the case of voivodships. The total share of subsidy and grant
in 2000 amounted to 84%, and in year 2006 only 36.1%. Thus own revenues in the revenues structure increased
from 16% in 2000 year to the level of almost 64% in 2006 year. Therefore it is possible to say that voivodship
and district in the initial period of their activity didn't administer with own revenues, but in considerable degree
were dependent on transfers from the state budget. The situation changed and at present the revenues structure of
these units presents more favourably. Nevertheless one should emphasize that own revenues of both voivodship
and district ,to a main degree consist of revenues on the corporate income tax, revenues on the personal income
tax and property revenues. And so these unit don't have the tax control and cannot influence on the size of their
revenues.
V. MACROECONOMIC INDICATORS OF FISCAL DECENTRALIZATION
An increase in the independence of local governments in raising budget revenues and expending them is an
effect of the decentralization of the public finance. A set of indicators is one of quantitative methods of the
measurement of the decentralization among others of macroeconomic indicators reflecting the level of the all
system of the public finance in the given state. On the revenue side on the macroeconomic level it is possible to
distinguish indicators showing:
 share of revenues of local government sector in GDP;
 share of revenues of different tiers of local government in GDP;
 share of revenues of local government sector in the total revenues of public sector of the country;
 share of revenues of different tiers of local government in the total revenues of public sector of the country.
However on the expenditure side on the macroeconomic level it is possible to distinguish indicators describing:
 share of expenditures of local government sector in GDP;
 share of expenditures of different tiers of local government in GDP;
 share of expenditures of local government sector in the total expenditures of public sector of the country;
 share of expenditures of different tiers of local government in the total expenditures of public sector of the
country.
Abovementioned indicators have been presented in tables 4 and 5.
Table 4
Local Government Revenues as a Percentage of GDP and of General Government Revenues in Poland in
2000 – 2006.
2000
2001
2002
2003
2004
2005
2006
Total Local Government Revenues
9,8
10,2
9,9
9,4
9,9
10,5
11,0
- % of GDP
53,3
56,6
55,8
52,0
58,6
57,2
59,2
- % of General Government
Revenues
Municipalities Revenues*
7,6
7,8
7,9
7,5
7,8
8,3
8,7
- % of GDP
41,5
43,4
44,3
41,7
46,1
45,7
46,9
- % of General Government
Revenues
Districts Revenues
1,7
1,8
1,5
1,3
1,3
1,4
1,4
- % of GDP
9,3
10,0
8,5
7,3
8,0
7,7
7,5
- % of General Government
Revenues
Voivodships Revenues
0,5
0,6
0,5
0,5
0,8
0,7
0,9
- % of GDP
2,7
3,3
2,9
3,0
4,5
3,9
4,8
- % of General Government
Revenues
*data from towns on district law are included
Source: author’s evaluation based on data from GUS (Main Statistic Office) www.stat. gov.pl and from
Financial Statement of State Budget, Ministry of Finance, 2000 – 2006.
Table 5
Local and Regional Government Expenditures as a Percentage of GDP and of General Government
Expenditures in Poland in 2000 – 2006.
2000
2001
2002
2003
2004
2005
2006
Total Local Government Expenditures
10,2
10,6
10,3
9,6
9,9
10,6
11,3
- % of GDP
50,1
47,9
45,5
42,8
46,2
49,9
53,9
- % of General Government
Expenditures
Municipalitis Expenditures*
8,0
8,2
8,2
7,7
7,9
8,4
8,9
- % of GDP
39,3
36,8
36,2
34,3
37,0
39,6
42,4
- % of General Government
Expenditures
Districts Expenditures
1,7
1,8
1,6
1,4
1,3
1,4
1,5
- % of GDP
8,4
8,3
6,9
6,1
6,3
6,7
7,0
- % of General Government
Expenditures
Voivodships Revenues
0,5
0,6
0,5
0,6
0,6
0,8
0,9
- % of GDP
2,5
2,7
2,4
2,5
3,0
3,6
4,5
- % of General Government
Expenditures
*data from towns on district law are included
Source: author’s evaluation based on data from GUS (Main Statistic Office) www.stat. gov.pl and from
Financial Statement of State Budget, Ministry of Finance, 2000 – 2006.
Local government sector revenues in GDP constitute about 10% in the all examined period. The similar
situation appears on the expenditure side, where total expenses of the local government sector in GDP reach the
level about 10%. Considering different tiers of local government, the high share of both profits and expenses in
the GDP (the data of towns on district law were included in it) were reached by municipalities . However
revenues and expenses of districts in GDP fluctuated within the limits 1.3 – 1.8 %, and revenues and expenses of
voivodships reached the level 0.5 – 0.9%. The similar situation took place analysing the share of revenues and
expenses of different tiers of local government in revenues and expenses of all public sector. On the revenue
side the municipalities made the high note (from 41, 5 in 2000 to 46, 9 in 2006). Revenues of districts constituted
the average share of 8.3% in total revenues of public sector in examined period, while revenues of voivodships
only 3.6% (average share in the analysed period). The expenditure side shaped similarly. In total expenses of
public sector, the municipalities reached the high share. Whereas the share of expenses of districts reached the
average level about 7% and voivodships - the average level about 3%.
VI. SUMMARY
From the moment of re-establishing the local government in 1990 it is possible to distinguish three periods
accepting the development of local government finances for classification. The first period includes years 1990 –
1999 when the local government was formed only by municipalities. It should be also emphasized that building
bases of finances for municipalities took place in conditions of transition of Poland from the economy centrally
planned to the market economy. As far as created budget law, in spite of many changes, constituted long-lasting
conception, it it isn't possible to say it about financial regulations. Principles of the division of financing sources
to the municipalities and the state even though they were recognised as provisional solutions they were
repeatedly amended and changed in the little scope. Second period includes the years 1999 – 2003. A local
government was implemented on the regional (voivodoship) and district tier. However financial sources of local
government units of different tiers weren't actually share out. An act on local government units revenues which
every year was amended, didn't solve the problem of financing of particular units of local governmnet tiers.
Voivodship and district benefitted transfer revenues mainly. Municipalities even though they received greater
influences on own revenues the number of imposed new tasks caused the decrease in their revenues actually. The
third period has begun from 2004. The new act on local government units revenues has increased first of all
shares of particular units of local government in personal income tax and in corporate income tax. The way of
admitting grant and subsidy were has been also changed. These actions in a main degree positively contributed
to changes of the revenues structure of local government units. Because a share of own revenues rose, transfer
revenues were reduced therefore.
Increasing the responsibility and competence of local government units is aimed at a taken decentralization
process of the public finance sector. Thanks to granted competence, the local authority together with the
community take decisions concerning the development path of given unit of local government. In the present
situation, when Poland is a rightful member of European Union and can use instruments of the regional policy,
the meaning of the local government is growing. Processes of strengthening the regions in European Union
cause, that main decisions concerning the social - economic development and a using of structural funds are
moved from the central stage to the regional stage. Thus local government units should precisely and deeply go
into the regional policy of the European Union so that take advantage of structural funds and realize aims of this
policy as well as eliminate differences in the social – economic development.
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