Personal income tax expenditures in Germany and Poland
Personal income tax expenditures in Germany and Poland

Summary/Abstract: Tax preferences are nowadays integral components of every tax system. They make it possible to perform non-fiscal functions by means of taxes. Because tax preferences result in the loss of public revenue and their budgetary effect is similar to that of expenditures, they are sometimes referred to as tax expenditures. In recent years, tax expenditures have increasingly become the subject of studies both in reports published by the governments of the OECD countries, as well as in the literature on public finance. Among other reasons, this is due to the growing amount of loss of revenue following the implementation of new forms of tax preferences into tax systems, and to the fact that the existing forms of tax preferences are being used at an increasing scale. This concerns in particular the personal income tax by means of which governments, to a rising extent, achieve their allocative, redistributive and stabilizing objectives. Tax expenditures in the personal income tax are the subject of analysis in this article. The article compares these expenditures in two EU member states – Germany and Poland. Moreover, it includes the characteristics of these tax preferences which result in the largest loss of public revenue in the countries analyzed.

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