The Injustice of the Current Cit Allocation System Among Local Government Units in Poland

Abstract

The aim of the article is to promote awareness of the issue of dividing corporate income tax among local government units and its current inequity in Poland. A review of the literature reveals that this topic is rarely addressed despite its significance. To address this gap, the article not only presents the factual state of affairs as described in existing literature but also undertakes extensive conceptualization and operationalization, introducing the term “spatial optimization of CIT.”

The study employs quantitative research methods following the quantification process. These methods include calculating an original indicator of spatial optimization of CIT, which measures the fairness of the corporate income tax allocation system among LGUs. The research explores four variants of this indicator. The concept of fairness has been operationalized and is presented as the distance from an ideal spatial allocation model of CIT. The study also establishes original criteria to verify the validity of metropolitan area delimitations.

The research, conducted for the years 2012–2022, unequivocally demonstrates a high level of unfairness in the current CIT allocation system among LGUs. Interestingly, the spatial optimization indicators across different variants show similar values and trend lines. The results confirm that certain metropolitan areas in Poland enjoy disproportionately high CIT revenues. These metropolitan areas can be grouped into three categories. The first group, characterized by the highest levels of CIT absorption from other regions, includes Warsaw, Poznań, and Katowice. The second group, where the scale of this phenomenon is smaller, includes the Tri-City (Gdańsk, Gdynia, Sopot), Wrocław, Kraków, Łódź, and Lublin. Finally, metropolitan areas such as Rzeszów, Toruń, and Płock are identified as regional absorbers.

The study recommends continued research into the injustice of CIT allocation at regional and local levels in Poland. It also suggests exploring alternative solutions regarding delimitations, adopted allocation models, and time periods. Applying the proposed methodology to other potential factors influencing CIT revenue disparities among LGUs would be highly beneficial. Such an approach offers the potential to estimate the level of injustice in analogous tax systems in other countries.

This work is the first to comprehensively and systematically address the issue of CIT allocation among LGUs in Poland. It also represents the first attempt to estimate the level of injustice in the CIT allocation system using an original methodology. The study positively verifies the hypothesis that both gross value added per capita and gross value of fixed assets in enterprises per capita can serve as benchmarks in the analysis, as they yield similar results in the spatial optimization indicators.