Warsaw, 18th April 2018 

 

POSITION OF THE UNION OF ENTREPRENEURS AND EMPLOYERS ON “MORAWIECKI’S FIVE”

 

On April 14^th, 2018, the Law and Justice program convention was held, during which Prime Minister Mateusz Morawiecki announced a number of activities, important from the socio-economic point of view. These promises were collectively named “Morawiecki’s Five” and from the perspective of micro, small and medium-sized enterprises, three of the proposed changes are of key importance: lowering the CIT rate for small taxpayers, lowering social security contributions for small businesses and supporting construction of local roads infrastructure. The Union of Entrepreneurs and Employers positively assesses the proposals presented during the convention.

The Prime Minister proposed lowering the CIT rate for small taxpayers by as much as 6%. It must be remembered that the basic rate is 19%, and since January 1^st, 2017, a taxpayer starting his business, or one whose sales revenues did not exceed EUR 1.2 million in the previous year pays tax at a reduced rate of 15%. According to the proposal, the rate would be further reduced – to the level of 9%.

It is worth noting that there is no lower CIT tax rate anywhere in the European Union. Already with the previous reduction, we indicated that small business functions in Poland in general in the form of ordinary economic activities of natural persons – there are almost 3 million of them, while CIT taxpayers are less than half a million. Entrepreneurs therefore usually pay personal income tax, not corporate income tax. At the same time, we consider the current state of affairs to be disordered and generally inappropriate. We take the position that the economic activity of natural persons, due to their specificity, should in principle be a form reserved for persons performing activities for the maintenance of themselves and their families.

In our understanding, this is a kind of a substitute for a full-time job and a formula that should be used by small craftsmen, professionals, owners of small service establishments and small shops. However, it is not a desirable situation in which people running a business for profit, multiplying assets, employing many people, and aiming to develop their business, run it in the form of a sole proprietorship. Due to the security of economic turnover, as well as the possibilities resulting from the selection of such a form of running a business, we believe that such entrepreneurs should, in principle, set up commercial law companies. Some of them could choose, of course, partnerships, which are not taxpayers by themselves (income of partners are taxed), but due to the protection of personal property, a very advantageous formula seems to be even a limited liability company that is already a CIT taxpayer.

Some would probably take advantage of the interesting opportunity to set up a limited joint-stock partnership, which also nowadays is subject to this tax. It is possible that in the future, income from limited partnerships will also be CIT-taxed. Looking at the issue from this perspective, lowering the CIT rate for small taxpayers is interpreted as an incentive for entrepreneurs to choose precisely these forms of running a business – we recognise this direction of change as the right one, nevertheless, it seems that lowering the rate is not enough.

An important obstacle, which discourages many entrepreneurs from establishing companies, is the level of complexity of regulations and the multitude of formal obligations that are associated with this process. Enough to say that nowadays registration of a company in the Central Registration and Information on Business CEIDG is completely smooth and quick, while registration of a new entity in the National Court Register may extend up to 6 months (there are known cases of rejection due to the entry in the application form “city of Warsaw” instead of the proper “capital city of Warsaw”, which resulted in the need to re-submit the application and wait for a second quarter to register said entity).

For this very reason, we call for the creation of a truly separate and significantly simplified legal regime for micro, small and medium-sized enterprises – including those operating as commercial law companies. Lowering tax rates is definitely a step in the right direction, however insufficient – in day to day operations, entrepreneurs are mainly bothered by protracted procedures, excessive formalism, and an excess of duties. The promise of such a change was lacking in the Prime Minister’s speech, which is why we are appealing for it in this document.

Another important element of the PM’s speech was the promise of introducing reduced social security contributions for small business operations (from which revenues do not exceed two and a half times the minimum remuneration for work). The project called “small business – small Polish Social Insurance Institution ZUS” is not a novelty and had already appeared before in the announcements of both the Prime Minister and other politicians, including the minister of entrepreneurship and technology Jadwiga Emilewicz.

Above all, one ought to praise the Prime Minister’s persistence in the fight for this idea – prolonged works concerning this issue clearly show that in the government, as well as in discussions with state institutions, there is considerable resistance to implementing this solution. The fact that after such a long time the PM still maintains his desire to move away from the dogmatic so-called lump sum social security contributions, independent of the revenues earned, definitely deserves to be appreciated.

The data we have at our disposal suggest that at least 800,000 entrepreneurs in Poland would benefit from the discussed solution – it seems that this is a very important group, both in the sense of an “economic anthill” and in the sense of potential electorate that should be taken care of. Any and all arguments against reduced social security contributions with very small incomes are devoid of reason, and this is best demonstrated by the fact that they change regularly. At first, it was claimed that lower contributions would mean lower revenue to the Social Insurance Institution and, consequently, deterioration of its financial situation – it soon turned out that a large part of entities potentially interested in this solution, at the moment do not pay any premiums, because it would make their activities completely unprofitable.

And now we often hear that companies should grow – micro should become small, small should become medium, and medium should become large. We shall bear in mind, however, that in this case (it is worth recalling – we are talking about companies achieving monthly income not exceeding two and a half times the minimum wage), there is no question of activities conducted for profit and with the intention of significant development. This solution is to serve people who are self-employed and for whom it is a substitute for full-time employment – they do small services to earn a living for their households.

Claims that they should strive for regular growth and increased employment, sound bizarre – hairdressers, plumbers, or people giving private lessons simply want the state not to “rip the off” of a large part of their revenues as it presently does, rather than plan to establish international hairdressing or plumbing corporations. Therefore, we should allow those who want to develop, grow, and multiply their assets, do just that and create the best conditions for them, and those who do business, because they have to do it to earn a living, we should ensure them that after paying all public levies, they will have enough money to make their business profitable.

For this reason, once again, we express our warm support for the concept of small business. We call for, however, a return to the source and the original concept – one levy of about 20%, including income tax, social security contributions, and health insurance premium, with a flat rate. This way, the scale of the burdens of the smallest companies will indeed be directly proportional to the revenue achieved. Nonetheless, worrying are the recent reports that small businesses will become a de facto extension of the “runway” for companies that the government has already implemented under the Constitution for Business. The idea that the minimum premium would be exactly the same as the preferential premiums for an entrepreneur for two years after the end of the half-year period without any taxes, is inconsistent with the basic assumptions underlying the proposed solution.

Entrepreneurs have heard for many months that the amount of premiums will be proportional to their income – if ultimately the project of a small business is to take the shape we can read about in recent reports, they will feel cheated and rightly so. Therefore, thanking again for their stubbornness in firmly presenting this issue in the framework of political debate, we call for return to original solutions – a lot simpler and very beneficial for entrepreneurs.

In the end, the third proposal important for business is the concept of establishing a new local road construction fund with at least PLN 5 billion allocated in it. It is said for a good reason that the road system is the “blood circulation of an economy”. Adequate infrastructure is essential for the safe transport of goods or for transporting employees. Local roads (i.e. poviat and communal roads) constitute 88% of all public roads in Poland. We do appreciate the significant improvement in the area of national roads, but the actual condition of the infrastructure can be assessed only by looking at the local road network. And their quality, despite the programs carried out in previous years (the famous “schetynówki”), is still very bad. This was noticed by the Supreme Audit Office and described in its report that not only the local road network is poorly developed, but it is also of low quality. For this reason, it was recommended to introduce a special financial system for at least a dozen or so years of to support the maintenance of local roads from the state budget. We express deep hope that the program proposed by Prime Minister will provide an adequate response to the threats resulting from poorly developed and poor quality of local road network. The new fund should significantly contribute to the increase of road safety as well as to the improvement of the conditions for running a business, because in many places in Poland at this moment, infrastructure deficiencies constitute the biggest barrier.

All discussed points from the speech of Prime Minister Mateusz Morawiecki are very important for entrepreneurs from the SME sector. As indicated at the beginning – the Union of Entrepreneurs and Employers positively assesses these proposals. We do not oppose radically broad social programs, and some of them – such as “500+” – we support and recognise as necessary, but we must not forget that only a relatively prosperous state with a stable budgetary situation can afford to undertake them. These two conditions will exist only with efficient economic growth, which in turn only exists in a good climate for business. Therefore, we consider the proposed changes to be beneficial and we support them, although we appeal to go further than it would appear from the words of Prime Minister. As we often write in our studies – Poland cannot afford to be just “average”. We should strive for the best possible solutions and not resort to half measures. In addition to the reduced CIT rate for small taxpayers, we should therefore simplify regulations and streamline procedures for small companies. Small business activity is the best solution, but it should be close to the original concept – one simple, low tax directly proportional to income. We hope that our recommendations will be taken by key policy makers into consideration.

 

Union of Entrepreneurs and Employers

 

Fot. Ravi Roshan / na lic. Unsplash

Warsaw, 18th of April 2018

Position of the Union of Entrepreneurs and Employers on state policy regarding
information on new nicotine products

The state’s concern for the health of its citizens should, if possible, take into account the impact of the actions undertaken on the economic situation and the development of entrepreneurship. And in particular if it can bring positive effects, both from a medical and an economic point of view. Therefore, the Union of Entrepreneurs and Employers ZPP appeals to repeal legislation prohibiting communication of the results of scientific research on e-cigarettes and HNB products (heat-not-burn, heated tobacco) as quickly as possible.

The state, as a body financing health care, for understandable reasons wants to run an active and consistent smoke-free policy and should do so. However, it must not take on an irrational character, where under the slogan of the fight against cigarettes, provisions of the law are introduced that hinder the effective fight against addiction to traditional cigarettes. The primary goal of the state should therefore be to care for public health and not to fight an industry, regardless of whether it offers traditional cigarettes or alternative nicotine products. We consider the prohibition of communicating the results of scientific research to be purely repressive and irrational.

Electronic cigarettes and HNB products (heat-not-burn, heated tobacco) available for several years in Poland, although they are not fully health-neutral, reduce the risk of disease compared to traditional tobacco products. All allow the delivery of nicotine, but without tar, carbon monoxide and other harmful substances found in the smoke, responsible for a number of diseases. The aforementioned scientific studies indicate that new nicotine products are up to several times less harmful than traditional products. Based on this research, British and American authorities are willing to revise their own policies in this area. These products may therefore have significant potential in reducing the harmfulness of nicotine products.

Regardless of health aspects, one cannot be indifferent to economic issues. Tobacco companies in Poland as one of the more significant producers in Europe, naturally have a chance to be an important research and production base for a new generation of products. The tobacco industry provides about 8% of domestic tax revenues (i.e. approximately PLN 23 billion annually) and employs over 60,000 people. The revenue from the export of traditional tobacco products produced in Poland amount to over PLN 8 billion. It should be expected, however, that in the long-term perspective and taking into account the progress of tobacco control regulations, the demand for such products will shrink rapidly, which may have negative economic consequences for industrial companies operating in our country. The solution is to effectively use the potential of our tobacco industry for new, innovative and safer products that will gradually conquer global markets.

We advocate for a change in the current approach of the Ministry of Health in this matter, which not only does not allow the achievement of the assumed regulatory objective (i.e. public health protection), but has exactly the opposite effect, limiting consumers’ access to less harmful products. Amendments in the law which will focus on the protection of public health and take into account the freedom of doing business are the changes we need.

Considering both public health and economic development, regulatory solutions are necessary that would allow manufacturers and sellers to inform smokers (consumers of traditional cigarettes) about the health benefits of using products with potentially less harmful effects.


Union of Entrepreneurs and Employers

Photo. Vaping360 / Creative Commons licence / flickr.com

12.04.2018

 

Ambassadors of EU Member States have accepted the compromise text of the revision of the Posting of Workers Directive 96/71 / EC (PWD) negotiated with the European Parliament.

The revised text of the PWD directive was agreed upon and accepted by the Committee of Permanent Representatives on April 11^th. Afterwards, the draft will be sent to the European Parliament for the final adoption – voting in the Employment Committee is possible still in April, the adoption is presumed to take place on June 21^st.

Works on the revision of the directive lasted over two years from the moment of presentation of a draft by the European Commission (EC) regarding the shape of the directive amendment in March 2016 – 10 years from the adoption of the directive. The revision of the directive is one of the elements of the implementation of the European Commission’s demands to strive to equalise the remuneration of employees performing the same work in the Community – “Equal pay for equal work” repeated numerous times by the President of the European Commission Jean Claude Juncker in his “ State of the Union” addresses, as well as by Commissioners Marianne Thyssen and Violeta Bulc.

The Union of Entrepreneurs and Employers (ZPP) joined the European discussion on the posting of workers in September 2017 presenting its position and potential consequences of the introduction of proposed provisions for the functioning of small and medium-sized enterprises along with organisations from 16 countries. During more than 60 meetings with the European Commission, Members of the European Parliament as well as other European sectoral organisations, employers as well as small and medium-sized enterprises, the UEE promoted the postulates of Polish entrepreneurs pointing to the impact of provisions on the functioning of, among others, the European common market.

“We had the pleasure to work in Brussels with think tanks – Bruegel, Globsec and ECIPE – communicating the economic potential consequences of those regulations, as well as with expert organisations such as the Labour Mobility Initiative. We participated in meetings, prepared materials, including brochures explaining the consequences of the regulations’ implementation. We promoted them during meetings and events in the European Parliament in Brussels and Strasbourg,” says Agata Boutanos, Director of the Representation Office of the Union of Entrepreneurs and Employers in Brussels, and added, “The event on October 21^st organised jointly in the European Parliament by Professor Zdzisław Krasnodębski and the Union on Delegating Workers and the Mobility Package was also the beginning of our cooperation with transport organisations on regarding the posting of workers in the sector – a debate that is still ongoing.”

The revision of the 1996 directive introduces the concept of long-term delegation, which means that after 12 or 18 (in case of consent for a 6-month-long-extension) months, the employee will be delegated in the long term and will be subject to virtually all labour law regulations in force in the host country.

Temporary work agencies are to guarantee the same terms of employment for a posted worker as for temporary employees working in the same country. For international transport, the regulations will be determined separately in the Mobility Package currently being discussed at the level of the European Parliament and the Council. The time for transposition of the Directive on the posting of workers into national law is 2 years from the entry into force of the Directive.

“The process of work on the amendment of the posting of workers directive has proven that Polish lobbying in the EU is still weak. We lack active institutional participants in Brussels. Conclusions should be drawn from this state of affairs in order to make lobbying and communication activities of the Polish side adequate to the size of Poland in the EU. A very important regulation from the point of view of Polish entrepreneurs is the second, currently ongoing, part of the discussion on the posting of workers in international transport. We are constantly striving to make the final decision in this matter as painless as possible for Polish transport companies,” comments Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers. 

The change of regulations consisting in shortening of the current posting period from 24 months to 12 (or 18) is unfavourable from the point of view of Polish entrepreneurs. One must hope that it will not critically affect the functioning of Polish companies on the markets of other countries of the European Union. One of the consequences will probably be a more frequent employee turnover due to a reduced posting time.

Contents of the press release “Posting of workers: Council confirms the compromise text agreed with the European Parliament”: www.consilium.europa.eu/pl/press/press-releases/2018/04/11/posting-of-workers-council-confirms-the-compromise-text-agreed-with-the-european-parliament 


Photo. European Parliament/ Creative Commons licence / flickr.com

5.04.2018

 

Conditions for conducting business activity in Poland.
Necessary improvement of legal and institutional business environment
and diametric change of the tax system

 

In Poland, in terms of the legal and institutional business environment, there is still much room for improvement. These are the conclusions from the analysis of international economic rankings, where in three out of four summaries, Poland achieved a worse result than the year before. To change this, the Polish tax system should be amended, made easier, more logical, and better understandable. It is necessary to rewrite numerous tax bills and reduce non-wage labour costs. These are the recommendations of the Union of Entrepreneurs and Employers, which were discussed as part of this year’s presentation of the report “Conditions for conducting business activity in Poland 2018”.

“After Constitution for Business, it time for the tax system and “state within the state”, acting as if next to it and apart from it, independent giants such as SANEPID, construction inspectorate and more than 40 other institutions alienated from economic policy and institutions acting without any supervision, being an entrepreneur’s nightmare,” said Cezary Kaźmierczak, President of the Union.

In 2017, Poland was one of the fastest-growing economies of the European Union, next to Ireland (7.8%), Romania (7%), Malta (6.6%) and Estonia (4.9%). One may conclude the increase in Polish GDP is at least to a certain extent the effect of the favourable situation in Europe. On the other hand, the worse results in this year’s rankings are, according to the Union’s experts, a disturbing symptom, demonstrating an insufficient pace of implementation of regulatory, pro-business changes.

Among the key determinants of running a business is the tax system, which is assessed in Poland as bad (2.2 on a five-point scale). The Online Legal Acts System indicates that in 2017 basic tax laws changed 36 times. Another problem is the level of complexity of Polish tax law. According to the Global Competitiveness Report 2017-2018, prepared by the World Economic Forum, it is the most problematic factor for running a business in Poland.

“In order to realise the complexity of our tax system, we need to quote a few numbers. Five laws, crucial for the Polish tax system, cover over 1,200 pages of text. With the optimistic assumption that the average reading rate is 200 words per minute, and 250 words fit on the page, reading these rules would take over 26 hours of uninterrupted reading. And one had better remember this is only a fraction of the tax law, as one should also consider the judicial decisions and interpretations issued by tax authorities,” comments Katarzyna Niemyjska, the Union’s Department of Law and Legislation director.

The level of complexity of the Polish tax system is reflected in the annual report of Paying Taxes, prepared by PwC and the World Bank. The Polish tax system was evaluated in 2018 as being 51^st in the world, ranked lower than the tax regulations of Botswana, Azerbaijan and Rwanda.

Another important barrier to running a business in Poland is the high share of compulsory social security contributions in general labour costs – it amounts to 29.7% and is the 12^th highest among OECD countries. As a result of high non-wage labour costs in Poland, with a gross salary of PLN 4,000, the employee earns little more than PLN 2,850 net, while his full-time job costs the employer over PLN 4,800. This means that roughly 50% of the gross salary goes in one form or another to the state and not directly to the employee.

“The basic demands of the Union of Entrepreneurs and Employers regarding the repair of the Polish tax system remain the same as last year. Above all, one should focus on a comprehensive change – in essence, rewriting the majority of tax acts from scratch – legal acts in the current wording become less and less understandable, and subsequent amendments only complicate them even more. As we speak, there are definitely too many of them. One cannot demand from the Polish people, including entrepreneurs, that they will act one hundred percent in accordance with the provisions of the tax law if key laws are changed as often as in Poland,” claims Cezary Kaźmierczak, President of the Union.

“A well-functioning judiciary is one of the main factors affecting the conditions of running a business in a given country. According to the latest edition of the prestigious Doing Business report, presented annually by the World Bank, the court enforcement of a contract takes in Poland 685 days and costs 19.4% of the value of the subject of the dispute. Thus, in this category, Poland is ranked on the 55^th place out of 189 countries considered. It is the exact same result achieved both in last year’s ranking and in 2016. This means that in the light of the analysis carried out by experts of the World Bank, the Polish economic judiciary de facto ‘stands still’ at least for the third year in a row,” says Jakub Bińkowski, Union expert.

In the Global Competitiveness Report, in terms of independence of courts, Poland was rated as 99^th out of 137 countries analysed. This means a decline compared to 2016, when we were 81^st out of 140 countries.

In a different ranking – Doing Business 2018, Poland was place 120^th out of 190 countries in the category of starting a business (this indicator refers to the establishment of a limited liability company). It is a fall from the 107^th place achieved in the analysis for 2017 (and an even bigger one compared to 2016, when Poland was 85^th).

“A country such as Poland should be its region’s economic leader and ought to set standards rather than try to adjust to them. These reservations aside, one must at the same time appreciate the initiative of the legislator, who in the analysed period managed to implement a number of significant and beneficial changes for entrepreneurs. In 2017, the law introducing the legal certainty clause entered into force. We also positively evaluate the signing of the Constitution for Business. The new law introduces solutions for entrepreneurs better than those hitherto in force,” said the Union’s President Cezary Kaźmierczak. “However, the amendment to the Pharmaceutical Law we consider to be undoubtedly harmful, under which the principle of the so-called ‘Pharmacy for a pharmacist’ rule was implemented.” he added.

The Union of Entrepreneurs and Employers postulates conducting pro-freedom policy, reducing a significant part of unnecessary regulations, and a strong liberalisation of the economy, combined with prudent tax legislation, based on much higher legislative standards. These recommendations are therefore the same as they were last year.

5.04.2018 Union of Entrepreneurs and Employers Report: Conditions for conducting business activity in Poland 2018

Warsaw, 4th April 2018

 

The Union of Entrepreneurs and Employers following the decision of the District Court in Warsaw, 7^th Civil Registry Department of March 23^rd, 2018, obtained the status of a representative organisation, as defined in art. 24 sec. 2 of the Act of July 24^th, 2015 on the Social Dialogue Council and other institutions for social dialogue.

“This news is extremely comforting for us. From the very beginning, getting the status of a representative organisation was one of our main goals. This will allow the Union to actively participate in social dialogue, and thus enable more effective implementation of the Union’s statutory tasks in the area of efforts to ensure the conditions necessary for Poland’s economic development and increasing economic competitiveness”, comments Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers.

As it was stated in the justification of the decision of the Court: “the applicant fulfilled all the criteria necessary to obtain the status of a representative organisation”.

On the day of the application’s submission, in accordance with the data in the statements on the number of employees and the basic type of activity, the Union associated employers of over 300,000 thousand people. The organisation operates in entities of the national economy whose basic activity is defined in 13 sections of the Polish Classification of Activities (PKD), referred to in the provisions on public statistics. Furthermore, the Union is an inter-branch organisation. It has members of 11 regional employers’ organisations, with headquarters located in 9 voivodships.

The Union of Entrepreneurs and Employers was founded and registered in the National Court Register on August 18^th, 2010. The basic duty of the organisation is to protect the rights and represent the interests of its associated members before the authorities and government administration, local self-government bodies as well as trade unions.

Moreover, the Union has been focused on the issues most important for Polish entrepreneurs from its very beginning, including the simplification of the tax system, reduction of bureaucratic obligations, and removal of investment barriers for entrepreneurs. In the organisation’s Manifesto it is written: “The Union initiates and supports all activities aimed at improving the conditions of functioning of enterprises in Poland”.

The Union currently associates 51,815 companies that employ over 522,000 people. Within the Union’s structures, there are 14 local organisations and 16 industry organisations.