Effect of the economic crisis on real estate local tax

The world economic crisis affected not only national real estate markets but also the local markets. The adverse effects of the crisis in the interlinked market systems were observed in the local real estate markets not only as lower market activity measured in terms of the number of transactions, but also as a decline in self-governmental budget revenues from real estate charges and taxes. Bad household economic situations force municipalities to spend more just to maintain the current public service levels. But aside from inflation, local expenditures are also driven by demographics. Service demands related to the aging of the “baby boom” generation will increase on into the future. This prompts initiatives to raise local taxes.

The researchers focused on real estate tax revenues in the years 2009-2016.  The aim of the study is to indicate the cause and effect relationships surrounding the aforementioned decline in tax revenues, considering that “ad valore” tax, which assumes real estate value as a tax base, is still not applicable in Poland.  The study of relationships from a timely perspective was conducted utilizing the relationship models and time series models with delays.  The analysis will be carried out with the use of data from the Polish system of official statistics, in particular the data concerning the financial statements of communes.

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Keywords: local tax, real estate market, local governmental budget

JEL codes: G10, R31