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Tax expenditures: spending through the Polish tax system 103

spending and it is unfortunately getting out of public control, and hence increases the fiscal imbalance. At the same time, the Ministry of Finance does not provide detailed information on the beneficiaries of using these structures and does not know whether the goals of socio-economic policy in this case has actually been achieved. However, the cheaper and morę effective solution for the realization of such objectives could be replacing tax expenditures with the direct ones. Unfortunately, there is no comprehensive analysis of the effectiveness and legitimacy of indiyidual tax expenditures in the Polish tax system, so far. Furthennore, tax expenditure reports do not encourage politicians to take any decisions to reform or simplify the tax system.

500 000 400 000 300 000 200 000 100 000

18.6% ........... ^18-^8%
i-1
16,6'	/o

2009

■ budget expenditure

20,0% 19,0% 18,0% 17,0% 16,0% 15,0%

2010 2011 2012 tax expenditures    share of TEs in public expenditure

Figurę 3. The share of tax expenditures in the total budget expenditure in Poland (million PLN) Source: own study based on the Polish Ministry of Finance data.

Moreover, the use of preferential tax structures in tax system affects the value of tax revenue in Poland, reducing it considerably (Fig. 4). Tax expenditures in 2012 constituted 29.7% of tax revenue of State taxes, which is the major source of budget revenue in Poland, whereas this indicator accounted for 13.0% of local taxes accordingly. The share or tax expenditures in indiyidual taxes is presented in Table 4. The preferences in the personal income taxes generated the highest losses as the conseąuence of tax expenditures and accounted for ca. 50% of revenue from the given tax. For corporate income tax it was the indicator of over 43% and 35% for value-added tax respectively. Basing on above-mentioned analysis it can be concluded that the loss of tax revenue as the result of implementing special tax structures in particular taxes in Poland is very significant. However, the introduction of tax expenditures should be the result of comparatiye studies on different tools of public interyention. If tax expenditure realizes the policy objective better than other instruments, it should be introduced. Otherwise, it is reasonable to overview the catalogue of existing tax reliefs in order to assess the necessity of losing this huge part of public reyenue, affecting significantly the fiscal imbalance in Poland.