Municipalities are losing revenue somewhat at their own request
Most of the measures taken by municipalities to increase their own revenues were ineffective or fraught with irregularities, such as charging local taxes at the wrong amount or for the wrong period, according to the NIK report.
According to the Central Statistical Office (CSO), municipalities’ own revenues increased overall in the country from PLN 113.5 billion in 2019 to reach PLN 145.8 billion in 2022. Despite this, problems such as the increase in the cost of public tasks, the burdening of municipalities with new tasks, the increase in the minimum wage, changes in the personal income tax, the COVID-19 pandemic and the war in Ukraine have been identified for 2019-2022, which could worsen the financial situation of municipalities.
– The effectiveness of raising own revenues is crucial for the economic self-reliance of municipalities, the NIK believes in its report. The report indicates that municipalities should take measures such as reasonable collection of local fees, monitoring of the current flow of receivables, timely collection of receivables, as well as rational use of concessions and exemptions. In addition, the Chamber encourages municipalities to attract new residents, prevent depopulation and promote social and economic development, notes Paweł Wyporski, tax advisor, manager at Thedy & Partners.
The NIK audit was carried out in 28 municipalities and found that although own revenues had increased in all municipalities, as many as 86% of them committed irregularities in the setting, collection and enforcement of these revenues. It was also noted that in most municipalities the share of own revenue in total revenue was increasing. However, in some municipalities the share was decreasing.
The audit also found irregularities in the levying and collection of local taxes and fees in 26 municipalities and deficiencies in tax control with taxpayers.
A significant number of municipalities had problems with the enforcement of arrears of own income, and 89% of the examined real estate lease and rental agreements contained provisions safeguarding the interests of municipalities, but in some cases irregularities were found in this respect.
– The NIK report indicates the need for effective action by municipalities to increase their own revenues, while at the same time identifying areas where mistakes or irregularities are committed, as well as proposing some good practices, such as writing down rules for dealing with copies of notarial deeds received by the office or carrying out effective tax audits, concludes Paweł Wyporski.