||One of the cornerstones of transition to market economy in Poland was the restitution of local governments with some self financing taxation powers. The main source of own revenues was placed in property taxation, which is consistent with market based economies. Real estate markets were undeveloped at the outset of reforms and the property tax base was set on property size and use formulas. The square meter rate caps were set nationally and created profound distortions not recognised by politicians. Residential properties are taxed at such a low rate that the tax is treated simply as a minimal fee insignificant in housing cost calculus. Non-residential rates are 35 times higher and discriminate against large area industrial users. Land is taxed 8 times less than buildings, which creates incentives for cost-less land speculation. Despite the apparent distortion effects on land use and despite the acute need for more robust local tax base necessary for aggressive infrastructure investments, there is a widespread popular opposition to switching towards an ad valorem formula, which would allow to selectively raise tax revenues without increasing an average tax burden as related to asset values. The standard arguments about increased accountability, transparency, efficiency and equitability do not find many followers. It seems that the local politicians as well as their voters still live with illusions that central governments will take care of local finances. In this view increased efforts need to be undertaken in the area of public relations and taxpayer education. At the same time the government is attempting to adopt a gradual strategy of introducing the notion of value based wealth taxation through small steps beginning with differentiation of tax levy by location in broad “land value” zones. At the same time there is a need to begin with revenue neutral changes, which raises the issue of who is going to finance the necessary preparatory work. The whole process is moving towards full ad valorem tax system is designed for about 10 years.