On Tuesday, the Sejm passed a new act on the income of local government units. Thanks to it, in the first year local governments are expected to receive almost PLN 25 billion more revenue.
231 MPs voted in favor of the new act on the revenues of local government units, one was against and 184 abstained. Now the act will go to the Senate.
Changes in local government finances
The new act changes the method of calculating local government income from PIT and CIT. They will be calculated as a percentage of the income of taxpayers of a given tax from the territory of a given local government unit, and not – as before – from the tax due, i.e. after deduction of reliefs and exemptions. Additionally, local governments will participate in PIT tax collected as a lump sum from recorded income.
According to the act, the share in the PIT tax will be 7% for communes, 8.6% for cities with poviat rights, 2% for poviats and 0.35% for voivodeships. In turn, in the case of CIT, these indicators would be: 1.6% for a commune, 2.2% for a city with poviat rights, 1.7% for a poviat, and 2.3% for a voivodeship.
The new act, instead of the current parts of the general subsidy for local governments, introduces the concept of local government financial needs, which will be financed with income from participation in PIT and CIT. There are five types of needs: compensatory, educational, developmental, ecological and supplementary. The Act contains methods for calculating the amount of these needs. If the income from participation in PIT and CIT of a given local government proves to be insufficient to cover the calculated financial needs, the local government will receive a general subsidy from the state budget.
Wealth adjustment
The new regulations also include a mechanism called wealth adjustment, maintained due to the large income differences of local government units, but differing from the current “Janosik” system. Local government units will not contribute to the “Janosik” state budget – the adjustment of wealth will, in principle, be made by reducing the amount of increased income from PIT and CIT.
On Tuesday, MPs introduced an amendment to the project aimed at specifying the rules for dividing two small reserves that were created during the parliamentary proceedings – one is intended for communes with national parks and other protected areas, and the other concerns spa communes.
The Act is to enter into force on the day following the date of announcement, with the exception of some provisions which are to enter into force on January 1, 2025 and one provision which will enter into force on January 1, 2026.
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