The Propensity to Tax Competition: The Case of Implementation Local Tax Policy by Polish Local Governments

The study is dedicated to identify the main factors determining the propensity of local authorities to compete for the access to the limited as well as mobile sources of local tax revenue. The success of such an activity should be discussed in relation to the stabilization of local budget revenues; hence it seems that the barriers of leaving tax jurisdiction could be better index to evaluate of the efficiency of local tax policy. The theoretical approach is based on the assumption that, if central government provides limitations of the right to improve local tax policy means (the scope of local tax jurisdiction), the local governments should focus on both the efficient acquiring the sources of tax revenues, and the stabilization of tax revenues in the future, in particular by the implementation of the barriers of leaving tax jurisdiction. The paper suggests studying a propensity to tax competition. The article formulates desideratum of the efficiency of spending on acquiring the sources of tax revenue, in particular, the need to identify the barriers to leave tax jurisdiction is suggested. The first and foremost way to build the barrier to leave tax jurisdiction could be reducing tax liabilities by local tax authorities, in particular by introducing local tax reliefs and local tax exemptions, as well as lowering local tax rates. Hence, the model of local authorities’ competition for local tax resources could be proposed. The empirical studies are dedicated to identify the actual propensity of Polish local government to execute the legal ability to impose tax policy instruments. The inquiry is based on comparing the fiscal consequences of implementing local tax policy within two groups of local authorities: small towns and countries (gminas) and medium-size towns and big cities (cities with powiat status). The period under investigation contains 14 fiscal years, started 2000 and finished in 2013. The method is based on the analysis of the structure and tendency of fiscal consequences of the decisions of local tax authorities.