Do local governments follow their neighbours' tax strategies? Tax mimicking amongst Polish municipalities

In this study, we identified the spatial property tax mimicking phenomenon at the local government level in Poland. The database used in the research contained data characterizing each of the 2479 municipalities (all of the municipalities in Poland) in terms of their real estate tax revenues and the effects of reducing the upper tax rates between 2003 and 2017. Spatial autocorrelation and spatial regression models were used to identify the scale of tax mimicking amongst municipalities in Poland and the process of making the real estate tax policies increasingly similar to each other. Municipalities with similar tax rate reduction index values were grouped into clusters. In most of the clusters, high values in a given municipality were accompanied by high values in neighbouring municipalities, whereas low values were accompanied by low values. This indicates the existence of the tax mimicking phenomenon.

Automated summary

This study identified the phenomenon of tax mimicking at the local government level in Poland, where municipalities tend to make their real estate tax policies increasingly similar to each other. By using spatial autocorrelation and regression models, the researchers were able to group municipalities with similar tax rate reduction values, revealing the existence of tax mimicking.