Abstract The concept of the political cycle was formulated in relation to the decision making of governments and parliaments at the national level, but it has also been used as… Click to show full abstract
Abstract The concept of the political cycle was formulated in relation to the decision making of governments and parliaments at the national level, but it has also been used as a framework for studying local financial decision making. Most of the earlier empirical studies focused on public expenditures, but later studies also investigated local tax policies. This article argues that, in Central and Eastern Europe (where the concept of political cycle has been applied very early so far), the meaning of typical local taxes is relatively limited, and levies financing local services may be a more likely policy area to demonstrate the existence of the political budget cycle. This case study is related to tariffs for water provision in Poland and solid waste collection in Bulgaria. In spite of official terminology, the legal definition and practice of both duties do not meet all criteria of the rigid definition of user charges for services. Due to their actual nature, the term “earmarked taxes” is used in the title, while the terms tariffs and earmarked taxes are used interchangeably in the text. The existence of the political cycle is tested through panel logistic and linear regression models. According to the legal regulations in both countries, tariffs for both services should be calculated in a technocratic way based on actual costs, however the article demonstrates that the impact of the electoral cycle on actual decisions on the level of levies still exists.
               
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