Taxes are the price we pay for public goods, and property taxes in particular are the price for local infrastructure. Theory says that in order to compensate for the "unearned" income, tax contributions should be proportional to the gains from public investments. However, in practice this issue turns out to be very complex, and different countries have very differentiated property taxation systems. For example, either the whole property (land with improvements) or only land may be subject to taxation. Also, the tax rate may be based on property value, on its size or on both of them. In some countries, for example in Poland, apart from regular real estate tax, other taxes or fees may be occasionally imposed, what makes the issue even more complicated. Depending on specific regulations, real estate taxation may cause various social and spatial redistributive effects. Generally speaking, the lower is the tax in relation to the value of public investments, the higher the attractiveness for private investments will be. The aim of this paper is to look at the relationship between real estate taxation and spatial development processes in Poland. In the first part of the paper the question will be addressed, how just and effective is the current system of taxation, or, in other words, what redistributive effects are likely to occur? In the following part possible alternative solutions will be considered, which can be drawn both from the experience of other countries and from theory. Finally, in the conclusion some remarks will be made on the role of real estate taxation in urban development and urban policy.
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