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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. 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