Warsaw, 30^th November 2020

 

Commentary of the Union of Entrepreneurs and Employers:
Adoption of double taxation on limited partnerships is a breach of the solidarity pact with business and is unfair to entrepreneurs

 

From the beginning of the legislative process, the Union of Entrepreneurs and Employers emphasised there were no rational arguments for the need to cover limited partnerships with CIT. The theses contained in the explanatory memorandum to the draft act turned out, one after another, to be false. Neither limited partnerships are used for purposes of tax optimisation (we stress once again that the Ministry of Finance itself admitted that the tax scheme using limited partnerships was only challenged six times basing on the anti-tax avoidance clause), nor has there been an unreasonable or detached from economic reality increase in recent years in their number. Furthermore, it is a generally accepted European practice not to cover these entities with CIT.

Nevertheless, the Ministry of Finance did not give up on this idea. As a result, the Sejm passed the double taxation of limited partnerships last Saturday, and the president signed the act that very same day, at night.

This is yet another levy that entrepreneurs (and at the end of the day – households and consumers) will have to pay from next year on. Recently, the sugar tax was adopted, and beginning on 1^st January 2021, the collection of the trade tax will be resumed. The design of the latter is, incidentally, so flawed that within the electronics and household appliances industry, there will only be one significant Polish taxpayer.

We fail to comprehend the stubbornness with which the government has consistently been introducing new burdens during a crisis, the worst one in decades. The assumed revenues from them constitute a drop in the ocean to save the economy, and even in “normal” times, they would not be a factor determining the budget balance. All the more so, the potential fiscal result of these burdens today cannot be assessed otherwise than as insignificant.

Many entrepreneurs, contrary to economic calculation during a crisis, keep the jobs they created in the name of social solidarity. The imposition of new taxes on them at this time is generally perceived as unjust and unfair.

We see what is happening in Europe. The analysis we conducted a few weeks ago shows that a significant number of OECD countries had decided decides to reduce their tax burdens in the face of the crisis. Germany lowered VAT. The Swedes proposed a comprehensive reform package to stimulate the economic growth, including a reduction in PIT or a decrease in social security premiums. The Czechs lowered VAT for selected services some time ago, and decided recently to lower the PIT rate.

At the same time when an increasing number of European countries decided to reduce burdens and cut taxes, the Polish government not only was unconvinced of the – seemingly obvious – VAT reduction on food services, allowing this industry to survive this difficult period, but on the contrary, it was more concerned with designing new burdens. Moreover, the Minister of Finance has already announced (despite earlier declarations) that further burdens may be imposed next year.

We believe that the introduction of new taxes during the COVID-19 crisis will thwart economic recovery and slow down the return of growth. For some time, it seemed to be an argument understood by certain decisionmakers. The general consensus around this issue made it possible to hope that the issue of abstaining from new burdens would be one of the key axes of agreement between businesses, the labour market, and the government. Considering recent decisions and the incomprehensible determination to introduce new burdens, maintaining this unity in the face of the pandemic seems doubtful.

 

See: 30.11.2020 Commentary of the Union of Entrepreneurs and Employers: Adoption of double taxation on limited partnerships is a breach of the solidarity pact with business and is unfair to entrepreneurs

 

Fot. stevepb / pixabay.com

Warsaw, 10^th November 2020

 

Position of the Union of Entrepreneurs and Employers
on the announcement of the introduction of the “Legal Shield”

 

The Union of Entrepreneurs and Employers welcomed with great hope the announcement of launching a “legal shield” for business. In the face of the intensifying second wave of the coronavirus epidemic and the threat of lockdown, it is necessary both to provide direct financial aid to help companies maintain liquidity, and to take legislative action.

We divided these actions into three separate sections: regulations to be postponed, regulations to be improved, and regulations to be implemented. They refer both to the currently pending draft acts and to the acts already enacted, but to enter into force in the coming future. We hope that the recommendations presented below will meet the interest and favour of the Ministry of Development, Labour and Technology, which is developing the “legal shield”.

Assumptions of a general nature for our proposal:

• a moratorium of at least 12 months on any new burdens for business;
• adjusting the projects underway to the exceptionally difficult situation of Polish entrepreneurs who facing the risk of another lockdown;
• deregulation and facilitation enabling the survival of the COVID-19 crisis and the rapid post-coronavirus recovery of the economy.

REGULATIONS AND PROPOSALS TO BE POSTPONED

• Sugar tax

The Union of Entrepreneurs and Employers has repeatedly expressed its views on the sugar tax. We raised a number of arguments against this public levy, quoting, among other things, the lack of research proving its effectiveness in the fight against obesity and being overweight. We still believe that the only result of introducing the tax will be an additional burden on household budgets and an increase in the popularity of cheaper, lower-quality products.

Therefore, we assess the sugar tax as a fundamentally negative concept. We also oppose the legislative process under which the sugar tax was adopted. Practices such as the amendment of a law that is not yet enforced (and this was the case with the sugar tax) raise our objections, especially when they refer to legal acts that are so important for business entities.

Regardless of the above reservations, as part of the postulates to the “legal shield”, we call for – in accordance with our demand for a moratorium of at least 12 months on new regulations detrimental to businesses – to postpone the date of its entry into force by a minimum of one year, i.e. to 1^st January 2022. Introducing additional burdens at the time of the deepest economic crisis in several decades is unacceptable and – in the case of the sugar tax – may result in the loss of tens of thousands of jobs in the entire beverage production chain.

• Corporate income tax on limited partnerships

We consider it unreasonable to cover limited partnerships with CIT. The sole effect of this move will be a significant increase in the tax burden on Polish entrepreneurs from the SME sector operating in this legal form. Contrary to the claims of the Ministry of Finance, limited partnerships are not used for the purposes of tax optimisation. As many as 99% of these companies have Polish partners, and only in six cases the general clause against circumvention of tax law was applied to tax schemes using limited partnerships.

Generally speaking, we recognise that the explanatory memorandum presented along with the draft act on CIT on limited partnerships is based on incorrect premises and therefore erroneous. Covering these companies with CIT will not contribute to the tightening of the tax system, it will only reduce the competitiveness of Polish companies.

Bearing the above arguments in mind, we believe that the proposal to tax limited partnerships with CIT should be abandoned. Presently, it is of highest importance that businesses do not have to face new burdens in the conditions of a crisis or during an economic recovery when the epidemic is brought under control. For these reasons, we consider it insufficient to extend the vacatio legis of the regulation reviewed by four months – CIT on limited partnerships ought to be abandoned.

• Retail sales tax

Due to the restrictions introduced, one of the sectors directly affected by the epidemic is of course retail. It should be stressed that these additional restrictions apply to the industry for the second time this year. Furthermore, this time they happened in November, a month which is particularly important to the whole sector due to the high seasonal turnover (upcoming Christmas, All Saints Day, Independence Day and the resulting long weekend).

Meanwhile, collection of the retail sales tax, which is an additional burden for the industry, is only suspended until 31^st December 2020. This means that the new levy will apply from the beginning of next year, i.e. in the period in which – according to optimistic forecasts – we can only expect the beginning of a slow return to the “normal” situation in retail trade.

In consequence, we believe that it would be reasonable to extend the suspension of this tax by an additional year, so that it would actually come into force on 1^st January 2022.

• Taxation of all civil law contracts

Despite the lack of regulations in this respect, the subject of covering all civil law contracts with social insurance premiums is being raised increasingly frequently in the public debate.

It must be emphasised that the labour market has been responding exceptionally well to the crisis related to the coronavirus epidemic so far. We can boast of one of the lowest unemployment rates in Europe. During the first wave of the epidemic, entrepreneurs avoided layoffs – the quick liquidity assistance, especially in the scope of the financial shield coordinated by the Polish Development Fund (PFR) certainly helped in this case.

However, there are numerous indications that the fall-winter wave of the coronavirus may turn out to be less kind to the Polish labour market. Many entities will not be able to survive the re-closure of the economy. Layoffs may turn out to be inevitable, and state aid programmes are unlikely to be as generous as a few months earlier.

The increase in non-wage labour costs is the last thing the Polish economy will need in the nearest future. Therefore, we call for no legislative initiative in the field of premiums for all civil law contracts.

• Other regulations imposed on entrepreneurs, including industrial entities

In addition to specific initiatives relating to increasing the public-law burdens on companies, an important factor adversely affecting the condition of entrepreneurs – especially in times of crisis – are other types of regulations scattered among many legal acts being proceeded, often striking at minuscule details within specific sectors of the economy. Therefore, a supplementary comprehensive review of the legal acts being processed should be undertaken in terms of their impact on entrepreneurs. For example, there might be various amendments resulting in an increase in burdens for energy-intensive enterprises, or an increase in the burdens related to waste management, also within the companies producing waste. Accordingly, a broad review of the legal acts being processed should be carried out in terms of their impact on the enterprise sector and amendments aimed at minimising their adverse effects on companies should be introduced.

REGULATIONS TO BE IMPROVED

• Act on the profession of pharmacist

The Union of Entrepreneurs and Employers participated in every stage of the legislative process of the act on the profession of pharmacist. We believe that, in principle, this is a necessary act, and the Council of Ministers adopted it in a compromise wording that reconciles various interests.

Unfortunately, at the stage of the parliamentary subcommittee, the draft was supplemented with two amendments eliminating in practice the sense of legal security of pharmacy owners. They essentially make it possible to close any facility based on denunciation and the broadened interpretation of unclear premises. This is paramount especially in times of epidemics, when pharmacies are often the most easily accessible point in the healthcare system for patients.

The draft act on the profession of pharmacist, adopted by the Council of Ministers, provided that the pharmaceutical inspection could revoke the licence to operate a pharmacy in the event of persistent violation of the pharmacist’s independence. The amendment introduced by the subcommittee removed the premise of “persistence” from the provision. As a result, it becomes possible to classify e.g. a dispute between a pharmacy owner and a pharmacist, or any other unclear circumstance, as a breach of the pharmacist’s independence. The consequence may be the revocation of the licence to operate the facility on this basis. It should be emphasised that under the regime of “pharmacies for pharmacists” this is an extremely severe sanction, because in many cases it may not be possible to obtain a licence again.

The other of the amendments we have questioned introduces new premises to the act, allowing for a shutdown of any pharmacy, pharmaceutical outlet or pharmaceutical wholesaler, making it effective immediately by law. The basis for immediate shutdown of a pharmacy (for a period of up to 3 months) is to prevent the manager of the pharmacy or the person responsible in the warehouse from performing tasks. The provision again contains a premise which is excessively arbitrary, undefined, and prone to broadening, the implementation of which allows for the application of an exceptionally severe sanction.

The combination of the two above-mentioned amendments eliminates the sense of legal security of pharmacy owners and threatens to reduce the availability of medicine to patients by closing more entities operating on the market. Therefore, we call for an amendment of the act so that it corresponds to the wording adopted by the Council of Ministers.

• Extension of the lump sum on registered income

Extending the lump sum on registered income so that it is a form of income tax settlement for the widest possible group of entrepreneurs has been one of the basic postulates of the Union of Entrepreneurs and Employers for years. For this very reason, we are very pleased that this proposal was reflected in a relevant draft act (by the way – the same one which provides for CIT on limited partnerships). We believe that the lump sum, due to its simplicity, should be a kind of “default” form of taxation for the SME sector.

Unfortunately, the rate matrix proposed in the act means that in practice it will be a taxation model favourable to a very narrow group of companies. From the point of view of the vast majority, a flat tax will still be a more attractive form, enabling the settlement of tax-deductible costs.

Bearing that in mind, we believe that the proposed new matrix of the lump sum on registered income should be modified and some of the rates included therein should be reduced. The problem concerns in particular the service sector; hence the key seems to be to lower the rates for liberal professions and artistic activity, and for a significant part of service activities (we propose reductions from 17% to approx. 10%).

• Economic restrictions related to counteracting COVID-19

As part of subsequent regulations of the Council of Ministers, additional restrictions on conducting business activity in Poland have been introduced over the last several weeks. We believe that the model of their implementation should be slightly amended. The main course of action should be to develop, together with industries, new restrictions of a strictly sanitary character related to compliance with the DDM standard (disinfection-distance-masks) and at the same time enabling them to continue their business. Restrictions of any kind should be introduced in advance and based on measurable, objective data (e.g. on the number of infections recorded in economic entities of a given type). The legislator should ensure the highest possible predictability of new regulations in these difficult conditions.

One should also reconsider the catalogue of the currently applicable restrictions and, if necessary, rectify them in line with the above-mentioned angle. We know about the ongoing talks regarding furniture stores; therefore, we would like to emphasise the need to enable businesses to operate, among others, shops with electronics, household appliances and computer products (justified due to the increasing share of employees working remotely, as well as students participating in remote education), or “commercial islands” (their location in open spaces, as well as the characteristics of these points of sales are not without significance in terms of the epidemic risk).

REGULATIONS TO BE IMPLEMENTED

• Reimbursement development mode

The pandemic has doubtlessly shown us in practice the importance of drug sovereignty – the dependence of the system on the supply of medicinal and medical products from third countries generates a number of risks, including the possibility of breaking global supply chains in crisis conditions or increased global demand for certain products.

Moreover, the innovative pharmaceutical industry can effectively act as a driving force for economic development – this fact has been noticed and taken into account, among others, in the content of the Strategy for Responsible Development.

The Strategy for Responsible Development also describes the need to support domestic drug production. In light of the above-mentioned diagnoses, this goal should be considered absolutely justifiable. Unfortunately, despite numerous declarations and developed concepts, the model of supporting drug production in Poland has still not been implemented. In practice, the share of the domestic pharmaceutical industry in GDP is decreasing. This means that the level of dependence on external pharmaceutical markets, contrary to the target set out in the SRD, is increasing.

We believe that the “legal shield” is an appropriate place to stop the discussion on the need to implement solutions supporting domestic drug production (described collectively as “reimbursement development mode”) – RDM ought to be its integral element.

• Sunday trade ban to be lifted

The experiences of the spring wave have taught us that the epidemic crisis also has a critical impact on trade. It is affected not only directly by legal provisions, but also by the mood of consumers or their concerns about, for example, a physical visit to a point of sale. We call for the ban on Sunday trade to be lifted. The coronavirus outbreak has triggered a deep crisis in the trade sector and other areas of the economy. After the spring lockdown, many stores did not return to their previous sales volumes.

The slower trade dynamics will translate into a decline in production in all sectors, which in turn will translate into a decline in the purchasing power of citizens and, consequently, a reduction in consumption. All possible measures must be taken today to stimulate production and trade, maintain jobs and demand.

Enabling trade on an additional and – for many industries – key day of the week is and will undoubtedly be a contributing factor. It may also contribute to reducing the risk of spreading COVID-19. Spreading the traffic over more days will reduce the number of customers visiting store simultaneously and reduce the risk of disease for store employees.

• Expansion of online sales

The dynamic development of online sales channels was a fact already before the pandemic, but at the moment it seems that an even greater part of consumer traffic can take place completely online. It is possible especially in the context of restrictions on the operation of commercial establishments introduced by successive regulations.

In view of the above, we consider it reasonable to extend the catalogue of products that may be sold over the Internet. It would also be a beneficial move from the point of view of implementing the principles of social distancing and limiting outdoors activity. We believe that it should be possible to sell legally available stimulants online, as well as prescription medicine, so that one no longer has to go to a physical retail outlet or pharmacy to buy them.

• Reduction of the VAT rate for food catering services

A flagship postulate of the Union of Entrepreneurs and Employers has recently been the proposal to reduce and harmonise the VAT rate for all food catering services to the level of 8%. Unfortunately, our demand was not executed, and in the face of the actual shutdown of the whole sector, restaurants were faced with the spectre of mass bankruptcies.

In the conditions of the ongoing crisis, harmonising the VAT rate at the level of 8% may not be enough. In order to enable catering establishments to be more profitable and, consequently, to survive in extremely limited operational conditions, the VAT rate should be harmonised to all catering services (including drinks) to 5%. From the budgetary point of view, this will be a relatively small loss (the closure of restaurants results in a turnover throughout the industry that is currently extremely low), but in the long run it will allow for securing the tax base, which should be one of the priorities of the policy pursued in the conditions of crisis.

Taking this into account, we believe that one of the elements of the “legal shield” should also be the harmonisation of VAT rates for food catering services, and perhaps also a revision of the rates of this tax for other services, the provision of which has been limited under the restrictions introduced in order to fight the virus.

• No excise tax increases; amendments to Excise duty act and Tax Ordinance

Industries manufacturing products subject to excise tax and related industries (such as food services, the hospitality industry, and event industries) have been severely hit by the epidemic crisis. The Union of Entrepreneurs and Employers calls for no measures to be taken to further increase the prices of excised products on which the operation of the experienced industries is largely based.

This appeal is all the stronger, because recently we have had to deal with a twice as severe excise tax increase – high, and what is worse, much greater than previously announced. Therefore, we believe that in order to provide basic legal certainty for entrepreneurs operating in excise industries (and also for representatives of related sectors), excise duty increases should be refrained from in the near future.

At the same time, it would be reasonable to introduce amendments to both the Excise duty act and the Tax Ordinance, regarding excise entities and covering, inter alia:

• clarification that excise permits are not revoked in the event that the taxpayer submits a collateral for the implementation of decisions resulting in tax arrears,
• clarification of the rules for submitting collateral for the enforcement of tax decisions at the taxpayer’s request also before issuing such decisions and withholding secured decisions,
• allowing the possibility of issuing certificates of no arrears in taxes in the event that the taxpayer submits a collateral for the implementation of tax decisions,
• admitting the possibility of suspension of a proceeding by the authorities if the resolution of the case may be affected by another proceeding in progress.
• Repeal of provisions lowering the maximum non-interest costs of consumer credit

We call for a withdrawal from the harmful reduction of non-interest costs of consumer credit. As part of one of the special COVID-19 acts, regulations were introduced limiting non-interest costs of consumer credit to an unprecedentedly low level. In the course of legislative work, we drew attention to the fact that by hitting legally functioning companies, this solution would result in the development of the shadow economy, and in extreme cases also of criminal groups.

Shortly after the regulations came into force, advertisements of “private loans” – granted, of course, on terms unequivocally pointing to usury – started to circulate on the Internet, just as we had predicted.

The COVID-19 crisis will certainly worsen the financial situation of many Poles. We believe that a rational legislator should not limit them the availability of legally functioning sources of external financing. Therefore, we support the repeal of the provisions under review as part of the proposed “legal shield”.

• Exceptional solutions ensuring the continuity of operations of strategic sectors

Certain sectors of the economy cannot under any circumstances be closed, regardless of the epidemic situation, due to the fundamental needs of the population – for example, the pharmaceutical sector or the production of essentials must function continuously. On these grounds, it is crucial to secure supply chains for these sectors, as well as ensure the availability of personal protective equipment and COVID-19 tests, so as to minimise the negative impact of the epidemic on the continuity of production plants. From this point of view, it is also imperative to maintain the efficiency of international transport corridors.

• Heightened flexibility of labour law provisions

The coronavirus epidemic causes significant difficulties in managing working time in companies. An increasing number of infections, quarantines, as well as the transition of a significant part of students to remote learning, together all cause numerous absences and problems with scheduling.

Considering the above, efforts should be continued in the field of – even temporary – increased flexibility of labour law provisions, so that it would be possible to secure the continuity of the operation of workplaces. Among the possible changes worth considering, one could highlight the extension of the catalogue of sectors of the economy covered by more flexible solutions in the field of recommending overtime work, as well as a significant increase (or suspension for the duration of the pandemic) of the annual overtime limit (a key change primarily from the point of view of production plants, in which some of the crew were sent to quarantine).

 

See: 10.11.2020 Position of the Union of Entrepreneurs and Employers on the announcement of the introduction of the “Legal Shield”

 

Fot. successphoto / Adobe Stock

Warsaw, 9^th November 2020

 

Introducing CIT on limited partnerships may curb investment and employment

 

• 97% of the surveyed entrepreneurs-co-owners of limited partnerships believe that CIT will reduce their willingness to invest.
• 5% say that CIT will reduce their willingness to increase employment.
• 5% believe that the new tax will reduce the competitiveness of limited partnerships.
• 75% consider altering their business model as a result of legal changes, and 27.75% closing their business.

– indicates the survey conducted in October 2020 by InfoCredit in cooperation with CRIDO and the Union of Entrepreneurs and Employers.

Entrepreneurs and co-owners of limited partnerships unequivocally assessed the impact of introducing CIT on the future of their businesses as negative. The survey results prove right the conclusions of the reports presented this October by CRIDO, InfoCredit and the Union of Entrepreneurs and Employers: “Limited partnerships in Poland – data analysis” and “Taxation of limited partnerships in Europe”.

“Polish, small, family-owned companies are most concerned about these changes. They definitely prevailed in the questionnaire, they answered most willingly and the quickest. Over 87% of the completed questionnaires came from companies employing up to 49 people,” says Jerzy Wonka, Business Development Director at InfoCredit.

The vast majority of respondents, as many as 97%, believe that the tax will lower their willingness to invest. Only 2.75% say it will have no impact on their business, while 0.25% say investments will increase. 86.5% say that CIT will reduce their willingness to increase employment (0.25% – boost their willingness, 13.25% – no impact). 94.5% believe that after the introduction of double taxation, the competitiveness of their companies will decrease (1.25% – competitiveness will increase, 4.25% – no impact).

Entrepreneurs believe that further operations in the form of a limited partnership after the introduction of CIT will no longer be relevant. As many as 65.75% are considering changing the model of business activity, and 27.75% are considering closing their companies. Only 6.5% responded that CIT will change nothing.

“Contrary to the declarations of the Ministry of Finance, the results of the survey showed what we had already known from our reports. The overwhelming majority of entrepreneurs, especially small ones, definitely negatively assessed the idea of CIT on limited partnerships. We hope that the Senate will listen to the voice of Polish entrepreneurs and the organisations representing them and, consequently, such harmful regulations will not be passed. The more so since this process takes place at a time of a creeping lockdown and many other problems that companies have to face. In such circumstances, discouraging entrepreneurs from fighting for their businesses is highly detrimental to the economy,” comments Mateusz Stańczyk, partner in the tax advisory team at CRIDO.

“The results of the survey confirm our assumptions. CIT on limited partnerships is a powerful blow to investments and employment. Moreover, it coincides with the crisis caused by the coronavirus epidemic, during which the entrepreneurs’ willingness to invest has anyway dropped to a record low. We find it difficult to understand why the legislator is so determined to force this solution. It will not reduce tax fraud, because limited partnerships are not the problem here. Not only did we prove this in our reports thus far, but also the Ministry of Finance itself admitted it. According to the information provided by the ministry, the tax authorities challenged tax schemes using limited partnerships only six times. One of the effects of this atrocious regulation may be the difficulty in overcoming the crisis caused by COVID-19 and the practical elimination of limited partnerships from the Polish economic landscape,” claims Jakub Bińkowski, director of the Department of Law and Legislation of the Union of Entrepreneurs and Employers.

 

***

About the survey:

The survey was conducted from 16^th to 30^th October 2020 in an electronic form. The questions were sent to limited partnerships registered in Poland and included in the InfoCredit database. We received 400 responses. Micro and small businesses were the most responsive. 189 responses came from companies employing up to 9 people (47.25%), 160 from companies employing 10 to 49 people (40%).

 

See: 09.11.2020 Introducing CIT for limited partnerships may curb investment and employment

 

Fot. stevepb / Pixabay.com

Warsaw, 19^th November 2020

 

APPEAL OF THE ENERGY AND ENVIRONMENT FORUM OF THE UNION OF ENTREPRENEURS AND EMPLOYERS: WE NEED AN EFFECTIVE WASTE MANAGEMENT SYSTEM, NOT ANOTHER TAX

 

A wide representation of entrepreneurs directly involved in the shape of the new model of extended producer responsibility participated in the works of the Energy and Environment Forum of the Union of Entrepreneurs and Employers.

Representatives of companies launching packaging products onto the market as well as of companies managing packaging waste participated in a series of consultations with the Ministry of Climate. The draft act implementing the set of waste management directives presented for public consultation does not contain any parameters of the new extended producer responsibility system, nor any guidelines regarding its administration and management. Thus, the actual structure of the EPR system will have to be the subject of a separate legislative initiative in the nearest future.

Adapting the Polish system of extended producer responsibility to the requirements of the directive is an enormous challenge, and its implementation should serve a very specific goal – to considerably increase the level of recycling of packaging waste. We are concerned that the model based on a quasi-tax solution will not achieve this goal effectively, generating disproportionately high costs to be borne by all consumers.

An excessive level of complexity, two streams of fees – arbitrarily charged and distributed, and above all else, the lack of interdependence between the responsibility of individual participants for a given aspect of the ERP and their competences and tools to be able to really influence the functioning of that aspect, are just some of the fundamental shortcomings of the system drafted by the Ministry.

Bearing the above points in mind, we would like to present the following recommendations which, in the opinion of the ERP Working Group operating within the Union’s Energy and Environment Forum, are the minimal conditions for an effective model of Extended Producer Responsibility:

• the proposed system must meet all the requirements of the directive in question, particularly the minimum requirements set out in Art. 8a, both in terms of the system’s construction and parameters determining, among others, the financial contribution by product manufacturers;
• funds within the system must follow waste, i.e. the costs incurred by manufacturers must not only reflect the net costs of separate waste collection, transport, and treatment, but also be actually incurred for the implementation of these tasks. Therefore, we are against the proposals of a quasi-tax model, in fact aimed at creating an additional stream of public money redistributed by the public authorities directly to municipalities;
• the scope of responsibility of individual participants of the system must be adjusted to the possibility of their impact on given indicators – responsibility should follow the actually performed tasks;
• those financing of the system (parties introducing products in packaging to the market) should have an assured influence on its administering and management (including: by organisations operating in the not-for-profit formula, properly supervised and licensed by the regulator);
• Polish legislation implementing the Extended Producer Responsibility should regulate the creation of a deposit system for disposable bottles which is one of the methods of implementing the ERP mechanism.

We do hope that the arguments presented above will be taken due consideration by those responsible for designing a new model of extended producer responsibility in Poland.

 

Energy and Environment Forum of the Union of Entrepreneurs and Employers
ERP Working Group

 

See: 19.11.2020 Appeal of the Union’s Energy and Environment Forum: We need an effective waste management system, not another tax

 

Fot. HomeschoolingMinimalist / Pixabay.com

Warsaw, 20^th November 2020

 

Position of the Union of Entrepreneurs and Employers on the draft amendment to the VAT act implementing the package of e-commerce VAT directives

 

The Union of Entrepreneurs and Employers has been drawing public attention to the problem of unequal conditions of competition between e-commerce platforms operating in Poland for a long time. In light of the increasing significance of online trade resulting from general trends and additionally reinforced by the coronavirus pandemic, the gap between the operating conditions of Polish and Chinese platforms is becoming ever more evident. Both the extensive export subsidisation system and unfair practices applied regularly by Asian platforms (underestimating the declared value of shipments, marking shipments as “gifts”, and ultimately marking parcel shipments as letters) enable them to offer goods at very low prices. At the same time, consumers purchasing goods through them are in practice unprotected. Thus, both domestic platforms and consumers lose out on the present situation. Moreover, the State Treasury is also at a loss of revenue – according to available estimates, unfair practices applied by Asian platforms generate a budget loss of PLN 2 billion annually.

One of the goals of the package of directives being implemented, and therefore also of the draft act under review, is to eliminate abuses in the field of circumventing the VAT collection system by platforms outside the European Union. This goal should be assessed generally positively. At the same time, we would like to emphasise that it is only a fragment of a wider regulatory landscape that results in the lack of equal operational conditions on the e-commerce market. It is at least equally urgent to introduce solutions for the collection of due duties or the enforcement of consumer regulations. Therefore, the presented draft act ought to be perceived as one of the first steps in the process of levelling the conditions of competition – this task has certainly not been completed yet.

By the same token, we draw attention to the fact that some of the solutions proposed in the reviewed draft actually constitute additional burdens for national platforms – detailed comments presented below.

The first example of unnecessary over-regulation envisaged by the legislator is the introduction of the obligation for e-commerce platforms to issue sales invoices for goods sold to consumers. It should be underlined that this is a proposal that goes beyond the scope of the regulations provided for in the e-commerce VAT package. The directives provide for the invoicing obligation for intermediary platforms, an obligation limited to certain B2B transactions and transactions concluded with consumers provided the platform is not registered in the European Community’s VAT system – One Stop Shop. The directives only provide for the possibility of extending this obligation by member states – the Polish legislator decided to make use of this option. In our opinion, this is an erroneous approach. According to the EU+0 rule, which is one of the basic postulates of the Union of Entrepreneurs and Employers, all kinds of requirements and restrictions resulting from the provisions of EU directives should be implemented into the Polish legal system in a formula not exceeding the minimum established therein. In other words, the implementation of directives should not be more aggravating for entrepreneurs than the minimum possible.

The proposed provisions clearly fail to meet this objective. Moreover, they can lead to a number of practical problems. We fear that consumers – seeing an invoice issued by an e-commerce platform – may incorrectly assume that the platform is the actual seller. The mechanism of legal fiction, which the legislator mentions in the explanatory memorandum, may turn out to be incomprehensible to a large part of consumers who, seeing the address and name of the platform on the sales invoice, may start directing possible claims to this platform, and not to the actual seller of the goods. Additionally, the introduction of this type of new requirement based on the aforementioned legal fiction will require the platforms to create new technological solutions from scratch, which – in the light of the deadline for transposition of directives – may prove challenging to implement on such short notice.

Furthermore, we would like to draw attention to the need to address the issue of fiscalisation of sales, in the case of which platforms would become a taxpayer on the basis of the project due to transactions carried out by third parties. We believe that this type of sales should be completely exempt from the fiscalisation obligation. This is particularly important as these transactions will not fall within the scope of the mail order exemption currently in force. Therefore, the lack of adequate regulations will cause significant technical problems, which will put an additional burden on the platforms. From the point of view of the platform’s status as a VAT taxpayer, it is also important to be able to withdraw the tax amount resulting from the transaction from suppliers’ accounts. One should keep in mind that, as a rule, the entire payment for the transaction is transferred to the account (or virtual account) of the underlying provider. Thus, the VAT amount is not transferred to the account of the platform that is to become the taxpayer of this tax. If the option described by us is therefore not provided for in the regulations, the neutral (as a rule) VAT will become the actual cost of business for e-commerce platforms.

We have also identified the moment when the VAT amount is to be shown to the buyer as an important area. The contents of the explanatory memorandum suggest that the VAT amount (in the case of goods subject to e-commerce VAT) should be shown before the payment is made. Meanwhile, in practice, the possibility of classifying a given transaction as subject to VAT (or not) will appear only at the stage of making the purchase, at the moment when the buyer provides data relevant to its status. Consequently, we believe that it is sufficient from the point of view of securing the interests of the consumer (for whom – ultimately – the key parameter is the gross price of the goods, and not their individual components) to be able to inform about the amount of VAT at the very end of the ordering process subject to e-commerce VAT.

To sum up, the Union of Entrepreneurs and Employers calls for active measures to ensure equal conditions of competition between Polish and Asian e-commerce platforms, at the same time appealing for further work on the project, taking into account the detailed comments presented above.

 

See: 20.11.2020 Position of the Union of Entrepreneurs and Employers on the draft amendment to the VAT act implementing the package of e-commerce VAT directives

 

Fot. StockSnap/pixabay.com

Warsaw, 26^th November 2020

 

Comparison of European lockdown policies

 

The Union of Entrepreneurs and Employers hereby presents a comparison of European lockdown policies. In our latest study, Union experts analysed the measures to contain the spread of the coronavirus pandemic put in place by ten European countries. To assess the restrictiveness of the introduced measures, we took into account the following: the possibility of movement and the functioning of schools, shops, services, restaurants, hotels and culture.

There are some basic conclusions from our data analysis. Firstly, the industry revolving around culture will be hit hardest by the pandemic – 7 of the countries surveyed closed cinemas, museums and theatres altogether, while the rest introduced considerable restrictions. The next most affected sector will be the food catering industry – 8 out of 10 countries surveyed allow only take-away operations.

Secondly, during the second wave of the pandemic, we have observed a shift in attitudes towards education. In the spring, we saw school closings on a mass scale. Presently, school closings seem to be kept to a minimum. Austria introduced the most restrictive measures, as all schools are officially closed although still offer childcare to those who need it. Second in this group comes Poland where only kindergartens operate relatively normally. The third is the Czech Republic where only the first two grades of primary schools are open. Italy and Belgium introduced a mixed system, while schools remain open in several countries, including Germany, the Netherlands and the United Kingdom.

Thirdly, the ability to purchase non-basic products has been severely restricted. In Belgium, the Czech Republic, France, Great Britain as well as the medium- and high-risk provinces of Italy, one will only purchase basic essentials. On the other hand, in the Netherlands, Spain, Germany and in low-risk Italian provinces, all types of commercial activity are allowed under the appropriate sanitary regime. Meanwhile, Poland’s approach can be described as mixed – stores selling irrelevant products located in malls and furniture stores are closed. Despite these restrictions, one can still buy non-essential products in stores outside of shopping centres.

Fourth, many of the countries surveyed introduced significant restrictions on services, in particular on services that require direct customer contact, such as hairdressing. In half of the countries surveyed, these services are completely closed. Countries that kept the service sector fully open are in the minority – 3 out of 10. Poland again has a mixed approach – services such as hairdressing and cosmetology remain open, while the activity of the fitness sector was limited.

As the data above shows, there are large discrepancies between measures introduced by different countries. As countries apply restrictions in various configurations, one cannot compare their stringency with great accuracy. Nevertheless, a comparison of European lockdown policies proves that the restrictions introduced in Poland are relatively mild. This is especially evident in the scope of restrictions on movement – Poland, unlike 7 other surveyed countries, did not introduce a curfew or a general restriction on movement.

 

See: 26.11.2020 Comparison of European lockdown policies

 

Fot. Glen Carrie / Unsplash.com

Warsaw, 7^th November 2020

 

Ladies and Gentlemen, Presidents of the Board, CEOs, Owners!

Our community is a highly diverse one. We are guided by different interests, views, and political sympathies.

In this case, however, we should present a unified front – to stop the pandemic from spreading and prevent a severe lockdown. According to what our policymakers are saying – a lockdown or re-opening the economy – both depend on the number of diagnosed cases and the efficiency of the healthcare system.

We do have a say in this though.

First of all, we can implement in our companies the highest sanitary standards. The current situation is not bad, but I urge you to personally evaluate what can be improved or done better. In person.

And secondly – from the position of your our authority or seniority, we must explain to our employees that it is neither us nor Prime Minister Morawiecki who pay them their salaries and wages, but satisfied customers. If as a result of a complete lockdown, there are no customers anymore, they may lose their jobs and livelihood. There will be no miracles; just like the government, we do not have any money of our own – only our customers’ money.

Experiences from all over the globe tell us that social discipline is key to curb the pandemic, discipline nowhere to be found in Poland. I am asking to you to actively persuade our fellow Poles – our employees – to comply with the restrictions of the DDM regime (Distance-Disinfection-Masks).

Join the cause! You have the necessary tools. You know best which to use.

Kindest regards,

Cezary Kaźmierczak
President of the Union of Entrepreneurs and Employers

 

See: 07.11.2020 Open letter of the President of the Union of Entrepreneurs and Employers to Polish Business

 

Fot. Helloquence / na lic. Unsplash

Warsaw, 17^th November 2020

 

THE APPEAL OF THE UNION OF ENTREPRENEURS AND EMPLOYERS TO THE EUROPEAN COMMISSION, THE COUNCIL OF THE EUROPEAN UNION AND THE POLISH GOVERNMENT: NECESSARY COMPROMISE FOR PANDEMIC RECOVERY

 

The issue of the rule of law, both in terms of the definition of this concept and its practical application in the context of current political events, has been the subject of dispute for a long time between institutions of the European Union and certain member states, including Poland.

The current discussion regarding the long-term financial perspective and the potential veto on the part of Poland and Hungary is another aspect of this dispute. It is all the more emotional, as it is additionally linked to the recovery fund that is to protect the economies of member states from the long-term effects of the crisis caused by the coronavirus.

The Union of Entrepreneurs and Employers believes that the ongoing conflict serves neither party. It is in the best interest of the European Union and its institutions, as well as of individual member states, to mobilise resources from the Recovery Fund as soon as possible.

For the EU, this is a question of credibility in the face of a crisis and ability to respond to emergencies. In a broader context, an efficient disbursement of money from the fund may also serve to achieve the political goals of the European Commission, including those in the field of environmental policies. Member states, in turn, want to quickly get back on track, and in this sense, they perceive the fund as an opportunity.

The growing internal tensions may threaten the unity of the European Union in the long run. The future of the European project will largely depend on the extent to which EU institutions and representatives of individual countries will be able to reach a compromise. We believe that the present situation is a serious test of this ability, and we wish this would go well.

The regulation on the general system of conditionality in the scope of the protection of the Union’s budget in the version adopted on 5^th November, to some extent, returned to the controversial regulations proposed in the original draft act, including the provisions on a breach of the rule of law, including “threats to the independence of the judiciary” or ineffective prevention, correction, and sanctioning of “arbitrary or unlawful” decisions of public authorities. These are obviously vague and interpretable categories, and linking them to such a far-reaching sanction as the possible blocking of EU funds raises understandable concerns for some member states.

Bearing in mind the above, we believe that it is in the best interest of both the European Union and all member states, including Poland, to reach a reasonable compromise as quickly as possible. It can take various forms and include, inter alia, the modification of the procedure for assessing a possible violation of the rule of law, clarifying the premises of violation listed in the regulation or, ultimately, amending the scope of these conditions

Therefore, there are at least several possibilities for overcoming this impasse – we appeal to the European institutions and the Polish government to reach a compromise as soon as possible. In this case, we can either all win together or we can all lose. A compromise is needed by the Union and the member states in order to mobilise funds for economic recovery after the epidemic crisis at the earliest opportunity.

 

See: 17.11.2020 The appeal of the Union of Entrepreneurs and Employers to the European Commission, the Council of the European Union and the Polish government: necessary compromise for pandemic recovery

 

fot. webvilla / na lic. Pixabay

Warsaw, 4^th November 2020

 

POSITION OF THE UNION OF ENTREPRENEURS AND EMPLOYERS ON LOCKDOWN

 

The Union of Entrepreneurs and Employers has consistently been advocating against shutting down the economy. In our view, the right direction is rather to enable the functioning of as many industries as possible, while maintaining – needless to say – all appropriate sanitary rigors. We are observing a disturbing tendency to restrict the operations of subsequent sectors based on unverifiable and sometimes even absurd premises (as is the case of shutting down the food catering industry, an action justified during a press conference with data on significant number of infections at weddings).

At today’s press conference, further restrictions were introduced, including to the operations of shopping centres. What raises our greatest concern, however, is the explicit announcement that the only step to follow the currently introduced restrictions is a complete shutdown of the entire economy (one could conclude from the statements at the conference that on a larger scale than the one in the spring). As we have mentioned before, a full lockdown is a direction we fundamentally disagree with. Of course, it cannot be ruled out that the collapse of the healthcare system may lead to the introduction of a “national quarantine” of some kind. Nevertheless, one should in such a case communicate this fact clearly and, moreover, be aware of the huge costs associated with a lockdown.

After the March-May period, we are wiser for the experiences of the first lockdown – a decision made by the vast majority of developed countries. As a result, we now have several estimates regarding its impact on both the economy and health.

In terms of the former, a lockdown obviously means a significant reduction in economic activity. In April this year, Minister of Finance Tadeusz Kościński stressed that each month the economy was shut down meant a decline in the GDP growth rate by 2 percentage points. Back then, the lockdown was a relatively new concept and its effects were subject to forecasts rather than specific analyses. Statistics Poland later provided hard data: in Q2 2020, Polish GDP decreased by 8.2% year-on-year. According to one study, global production at the peak of the lockdown decreased by 33%, and over the entire year, global GDP will have decreased by over 9% (A. Mandel, V. Veetil “The economic cost of COVID lockdowns: an out of equilibrium analysis”). The World Bank presented a slightly more optimistic forecast, according to which the decline in global GDP will amount to 5.2%.

Faced with difficult decisions regarding a possible re-closure of economies, experts in other countries are trying to recalculate the potential costs of this solution. Economists quoted by The Daily Telegraph fear that the UK economy may shrink by 12% in November (one must remember this country was particularly affected by the first wave of the epidemic – its GDP dropped by 20% in Q2 2020). The German Institute for Economic Research (Deutsches Institut für Wirtschaftsforschung) estimates that the partial lockdown in November will cost the German economy EUR 19.3 billion and will put 400,000 workers at risk.

There is therefore no doubt that the economic costs of the lockdown are enormous. At the same time, it is not at all certain whether it is the optimal solution from the point of view of counteracting the epidemic. According to one of the studies (A.D. Arnon, J.A. Ricco, K.A. Smetters “Epidemiological and economic effects of lockdown”), interventions of federal and state authorities in the USA reduce social contacts to a much lesser extent than voluntary social distancing, which is responsible to the largest extent for this reduction and at the same time has a much lower economic cost. In particular, the authors of the study argue that individual interventions concerning people’s behaviour (such as ‘stay at home’) were much more effective in reducing viral transmission than restrictions imposed on businesses.

In this context, it is difficult to ignore the scientific dispute regarding the medical significance of a lockdown. The famous “Barrington Declaration” indicates that “lockdown policies have disastrous effects” on public health in the short and long term and, paradoxically, may lead to an increased number of deaths in the coming years due to their impact on diagnosis, vaccination, and treatment chronic diseases, as well as the mental health of the society. The Well Being Trust has estimated that the number of ‘additional’ deaths caused by COVID-19 and brought about by depression, addiction, or isolation-related loneliness could in the US be as high as 150,000. The negative impact of the lockdown policy on particularly vulnerable groups, such as children and the elderly, is also repeatedly reported. According to some researchers, the negative effects of lockdown on the healthcare system might be observed for up to five years. A detailed description of research and available data on the impact of lockdown policies on public health can be found in the latest study by the Warsaw Enterprise Institute “It is too late for a hard lockdown”.

To sum up, the Union of Entrepreneurs and Employers is against shutting down the economy. We believe that Poland cannot afford another lockdown. We understand that the healthcare system is approaching its limits and this may constitute an argument for “a national quarantine”. Nonetheless, we emphasise the enormous economic costs that it will entail, and we also draw attention to the doubts regarding the validity of this solution from the point of view of public health.

 

See: 04.11.2020 Position of the Union of Entrepreneurs and Employers on lockdown

 

Fot. Corona Borealis / Adobe Stock

Warsaw, 4^th November 2020

 

Position of the Union of Entrepreneurs and Employers on the Directive of the European Parliament and of the Council on adequate minimum wages in the European Union

 

The Directive of the European Parliament and of the Council on adequate minimum wages in the European Union, proposed on 28^th October 2020, constitutes the next stage in the implementation of the European minimum wage. The Union of Entrepreneurs and Employers consistently opposes the introduction of such a solution due to: the European Union’s lack of competence to act in the field of wages; the non-binding nature of the political declaration known as the European Pillar of Social Rights; and the negative social and economic effects that this regulation will cause. Furthermore, the Union of Entrepreneurs and Employers is critical of the way how the European Commission used the opinions collected during consultations with the European Economic and Social Committee and of the solutions presented in the draft Directive, in particular the definition of the adequacy of the minimum wage and the aggressive formula for extending collective bargaining.

The first aspect of the Directive on adequate minimum wages in the European Union that raises serious doubts is the choice of the legal basis. In the explanatory memorandum we read that “the basis of the proposed directive is Art. 153(1) (b) of the Treaty on the Functioning of the European Union (TFEU), which states that the Union supports and complements the activities of the Member States in the field of working conditions, within the boundaries of the principles of subsidiarity and proportionality (Article 5(3) and 5(4) of the Treaty on European Union TEU). Since it does not contain measures directly affecting the level of pay, it fully respects the limits imposed to Union action by Article 153(5) TFEU”. In the opinion of Union of Entrepreneurs and Employers, the above claims are false. Article 153 TFEU is the standard legal basis for EU actions in the field of social policy. Art. 153 sec. 1 lists a number of areas in which the EU can support and complement the action of member states. One of them is listed in Art. 153 par. 1 b as “working conditions”. However, as a clear exception to the EU’s social competences under Art. 153 par. 5 TFEU states that “the provisions of this Article shall not apply to pay”. It is evident that Art. 153 par. 5 TFEU does not mention the direct impact on the level of remuneration, but explicitly states that the EU institutions have no competence in this area, whether directly or indirectly. This means that the Treaties in a clear and literal way exclude EU action in the field of wages, and the proposed Directive is an example of exceeding the competences and ignoring EU law by the European Commission.

The second debatable issue is the justification of the need to introduce the Directive on the European minimum wage by referring to the European Pillar of Social Rights (“EFPS”) established in November 2017. The EFPS assumptions include adequate minimum wages. It is worth noting, however, that the EFPS is not a legal act, but merely a non-binding political declaration that some believe is intended to stimulate the development of EU legislative initiatives on social rights. Nevertheless, the EFPS provisions themselves exclude this possibility. Recital 18 of the ESPS makes it clear that “at Union level, the European Pillar of Social Rights does not entail an extension of the Union’s powers and tasks as conferred by the Treaties. It should be implemented within the limits of those powers”, while recital 19 states that “the establishment of the European Pillar of Social Rights does not affect the right of Member States to define the fundamental principles of their social security systems and manage their public finances, and must not significantly affect the financial equilibrium thereof”. Therefore, the Union of Entrepreneurs and Employers is of the opinion that the regulation of the minimum wage remains the exclusive competence of member states, and although the EU may take measures to support them in improving working conditions, such instruments should not possess the binding nature of a directive.

Thirdly, it should be noted that the Commission did not consider to a sufficient extent the results of its consultations. The Union of Entrepreneurs and Employers participated in the consultations of the European Commission, and its representatives sit on the European Economic and Social Committee (“EESC”). The explanatory memorandum to the Directive states that “the European Economic and Social Committee also adopted opinions of relevance for an EU initiative on adequate minimum wages”. However, the applicants ignored the fact that the EESC’s Opinion failed to reach consensus on a number of contentious issues, including the EU’s competence to act on minimum wages. In fact, the Opinion issued by the EESC reflects the gap between the positions of the European Workers and Diversity Group and the Employers Group.

With regard to the impact assessment of the Directive, it should be noted that the applicants underestimate its social and economic impact. The explanatory memorandum states that the Directive will significantly improve the remuneration of employees and reduce workers’ poverty. The applicants note that “the expected economic impacts include increased labour costs for firms, increased prices and, to a lesser extent, lower profits”, but argue that the impact on enterprises would be mitigated by an increase in consumption among low-wage earners supporting domestic demand. Apart from the fact that this concept was not supported by any calculations, the applicants forgot that the rising labour costs would lead to an increase in arbitration on the European labour market. According to the research by The Netherlands Economic Review, the average employment on a non-employment basis in the OECD is 11.5%. On the other hand, in Poland, France, Italy, Portugal, Spain and the Netherlands, as many as 21% to 27% of employees are employed on the basis of civil law contracts, and this number is constantly growing. The European minimum wage may make an employment contract an even greater deficit commodity on the labour market. Furthermore, as a result of the introduction of the European minimum wage, employers may force employees to switch to part-time work, which would effectively reduce their remuneration.

In terms of the provisions of the Directive themselves, the Union of Entrepreneurs and Employers has the following reservations.

First of all, the Union of Entrepreneurs and Employers criticizes the provisions of Art. 5 of the proposed Directive, a definition of the adequacy of minimum wages. Article 5 obliges Member States to introduce the necessary measures to guarantee the adequacy of minimum wages based on stable and clear criteria. Interestingly, the requirement to establish a minimum wage at 60% of the gross median wage and 50% of the gross average wage are mentioned in recital 21 and not in the text of the directive itself. The preamble, contrary to the provisions of the directive, is not binding, although it has the so-called indirect authority and is often used to provide a purposeful interpretation of regulations. Consequently, despite the lack of a literal provision, it can be expected that the Directive will be interpreted in a way that obliges member states to ensure a minimum wage at 60% of the gross median wage. The Union of Entrepreneurs and Employers is of the opinion that such a postulate is unacceptable due to the lack of EU competence in this area and the negative economic effects that such an obligation will have for enterprises and employees.

And secondly, the Directive introduces an aggressive formula for expanding collective bargaining, which does not respect the traditions of the member states where the minimum wage is regulated by law. Art. 4 sec. 2 of the proposed Directive states that “Member States where collective bargaining coverage is less than 70% of the workers defined within the meaning of Article 2 shall in addition provide for a framework of enabling conditions for collective bargaining, either by law after consultation of the social partners or by agreement with them, and shall establish an action plan to promote collective bargaining”. Poland, despite being a country with a low level of unionisation, meets the demands of the Commission in terms of updating the minimum wage, involvement of social partners, and the minimum wage monitoring and enforcement system basing on the provisions currently in force in Poland of the Act on the minimum wage for work. Consequently, EU action in this area is unjustified.

Institutions of the European Union are bound by the rule of granting, which means that the Union acts only within the boundaries of powers conferred on it by the member states in Treaties, and by the principle of subsidiarity, i.e. taking the least intrusive, yet effective means to achieve a given goal. The directive on adequate minimum wages in the European Union violates both of these fundamental principles of EU law, and therefore should be assessed negatively.

 

Fot. Guillaume Périgois / Unsplash.com