Cadastral tax in Poland? Experts see pros and cons

• In Poland, many apartments are purchased solely as an investment.
• According to the OECD and the IMF, the main argument for introducing a cadastral tax in Poland is the need to increase the revenues of the public finance sector due to its deep deficit.
• Currently, property taxes generate little revenue for the state.

The cadastral tax, which is the tax levied on the value of real estate, has been a topic of public debate in Poland for years. The topic has recently returned in connection with the recommendations of the International Monetary Fund and the Organisation for Economic Co-operation and Development (OECD) published at the beginning of the year.

Would this type of tax affect every Joe who owns a flat? No, as Money.pl explains, supporters of this tax usually propose that it should apply only from the third flat of one owner. A tax constructed in this way would affect 0.8% of the country's population.

What do economists think about the cadastral tax? The Money.pl survey shows that they mostly support this proposal. The thesis that Poland should introduce a progressive cadastral tax was agreed with by 61% of the 44 economists who took part in the survey. It was rejected by 25% of those surveyed.

According to the OECD and the IMF, the main argument for introducing such a property value tax in Poland is the need to increase the revenues of the public finance sector due to its deep deficit. Currently, property taxes generate low revenues for the state. According to OECD data, property taxes account for 3.4% of total tax revenues in Poland, while in countries belonging to this organization this share is on average 5.3%.

A progressive cadastral tax, e.g. on the 3rd or 4th apartment, could not only increase revenues to the state budget, but also encourage better use of housing resources and counteract real estate speculation

- says Dr. Łukasz Goczek, professor at the Faculty of Economics of the University of Warsaw, for Money.pl.

As he explains, many apartments are bought solely as an investment, often remaining empty, which artificially limits the supply of available premises and drives up rental prices. The introduction of cadastral tax will create a strong financial incentive to rent or sell such properties.

Critics of the land registry tax believe that it would be the other way around: it would make buying apartments for rent less profitable, which would result in a decrease in their supply.

Money.pl also lists the arguments of other opponents of the housing value tax. Most often, they point to the high costs of its collection.

- The tax base seems small here, and the collection costs would probably be relatively high. Potential net tax revenues would be small - notes Prof. Michał Brzeziński, a lecturer at the Faculty of Economics at the University of Warsaw, quoted by Money.pl.

Economists who support the cadastral tax respond that the technical difficulties can be solved, since most OECD countries are able to obtain higher budget revenues from property taxes than Poland.