The Forest Fund as an instrument for addressing budget deficit in Polish forest districts

Motives: The forest fund was established to ensure the financial stability of forest districts whose operations are financed by the State Forests National Forest Holding in Poland. However, the main role of the forest fund is to distribute funds from high-income forest districts to districts reporting a budget deficit. Aim: The purpose of this paper was to analyse and evaluate the model of managing forest fund resources in view of the provisions of the applicable legal regulations. Results: Between 2013 and 2020, the allocation of funds to forest districts reporting losses did not contribute to fair and rational distribution of resources, nor did it eliminate differences in the financial performance of forest districts operating under various environmental and economic conditions and implementing nature promotion and social education activities. The mechanism by which timber sales (operating costs that reduce profit) can be deducted from the forest fund raises serious doubt. Districts that benefit from such write-offs can program the amount of deductions in the forest fund. The above violates the principle of tax equality which states that tax laws should be applied in an identical manner to all taxpayers. A decrease in profits posted by forest districts reduces the central government’s revenues in virtue of the taxes paid by the State Forests.