ZPP Newsletter
Warsaw, 19th September 2018
The economy and state budget are in good shape
Both the financial situation of the budget and the results achieved by enterprises are getting better, as the latest Business Paper by the Union of Entrepreneurs and Employers regarding the financial condition of the Polish economy describes. However, there are threats appearing on the horizon.
The financial condition of an economy can be analysed from two angles. The first is the issue of the situation of public finances. In this respect, Poland has seen a clear improvement recently. With a gradual increase in budget expenditures, revenue increased even more, especially in terms of VAT.
“One can clearly see the results of the coexistence of two factors, i.e. the excellent economic situation, manifested by the increase in internal demand and the tightening of the tax system in the field of counteracting extortion of VAT refunds,” says Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers. “These two elements have significantly contributed to the reduction of the deficit, as the revenues from taxes on goods and services constitute the main component of budgetary tax revenues,” he adds.
In 2017, the lowest budget deficit was achieved in ages. At the same time, however, due to the excellent economic situation in the world, some countries have recently recorded a budget surplus, while in Poland a long-term deficit has been maintained for a long time. As a result, the debt of the public finance sector is growing, even though the situation of the budget recently can be described as good compared to previous years. While indirect taxes, in particular VAT, are of key importance to budget inflows from the point of view of revenues to the budget, the greatest threat to the stability of public finances seems to be the expenditure related to the execution of compulsory social security benefits, which are already the most important component of budget expenditures (in 2017, we spent almost twice as much on them than on family benefits, including 500+).
Apart from the relatively good situation of the state budget, attention should be paid to the financial condition of enterprises. Their revenues have recently increased dynamically, although large companies play a major role in this respect. It is enough to mention that in 2017, they achieved an average income of PLN 578 million, while medium-sized and small companies achieved an average income of PLN 29 million. At the same time, micro-entrepreneurs could in 2016 boast an average revenue of PLN 520,000 – merely four years earlier, this was only PLN 460,000. Therefore, there is no doubt that economic entities of all sizes are achieving higher and higher revenues, however, the disproportion between SMEs and large enterprises is very large, which naturally results from the specificity and scale of their operations. Interestingly, in small companies we can observe a slightly higher share of wages in total costs than in the case of large entities.
“Revenues of business entities are growing regularly, but we have in fact experienced increased dynamics recently,” says Jakub Bińkowski, Secretary at the Department of Law and Legislation of the Union of Entrepreneurs and Employers. “The result thereof is that entrepreneurs have accumulated a record amount of savings on their bank accounts. At the same time, micro-enterprises have a relatively small share in the revenues generated by companies in spite of a clear advantage in terms of their number.”
To sum up, Polish economy is clearly gaining from the excellent economic situation, from the resourcefulness of Polish entrepreneurs, as well as from the tightening the tax system. However, the question remains unanswered whether – especially in the area of budgetary discipline – are we taking advantage of the current conditions to a sufficiently high degree.
Fot. Martin Henriksen / tempest.dk
