Implementing Property-Tax Reform in Transitional Countries: The Experience of Albania and Poland

Abstract

Central and Eastern European countries are undergoing a radical transformation from command to market economics. Although priority has focused on privatisation, these countries have intitiated extensive political and fiscal decentralization. Despite the recent establishment of new local governments, these countries arc struggling to develop rapidly the legislative and administrative foundations related to expenditure and revenue responsibilities, control of state-owned assets, and the relationship between regional and central governments. One remaining obstacle to effective decentralization is the lack of adequate local revenue. Although there is a wide diversity in the structure of local revenue systems, theory and experience indicate that user charges and property taxes traditionally provide the primary base for an effective and stable local revenue system. This paper focuses on the important role which property taxation can play in providing the foundation for stable local revenue systems in the transitional countries. The paper begins with a brief summary of the current international experience with property tax reform. These international lessons are then applied to two transitional countries, namely Poland and Albania.