Warsaw, 20^th January 2021

 

Memorandum of the Union of Entrepreneurs and Employers on the impact of restrictions on coronavirus transmission: opening the economy is associated with a moderate risk of increase in the number of infections

 

Abstract

In this document, we summarise the results of two independent studies that look at the effectiveness of government restrictions on reducing coronavirus transmissions. These studies show that among the non-pharmaceutical interventions used, the ban on public gatherings of more than ten people and the closure of schools both have the greatest impact on reducing the number of cases. Meanwhile, the impact of restrictions on economic activity, such as food catering industry or services, is limited. Similarly, in terms of easing restrictions, a significant increase in the number of infections was recorded only in the case of reopening schools and allowing public gatherings. The results of the reserach discussed compel to question the validity of the order of easing the restrictions adopted by the government, within which it was decided to partially reopen school, while maintaining restrictions for business activity.

The first coronavirus case was diagnosed in December 2019. Thirteen months later, a total of nearly 100 million coronavirus cases have been reported and 2 million people have died of COVID-19.

To contain the spread of the new virus, governments around the world imposed a number of restrictions on economic and social activity. Restrictions, formally known as non-pharmaceutical interventions, unfortunately have severe consequences. In Q2 2020, which saw the majority of restrictions, the GDP of the European Union fell by 13.9% y-o-y, and unemployment increased by 2.7%. These were the sharpest recorded economic declines since measurements began in 1995.

The pandemic came as a shock to countries and economies around the world. However, data is collected over time that allow for the evaluation of the effectiveness of specific actions. Two independent studies can be cited as examples thereof. The first was conducted by a team of researchers led by Jan M. Brauner Ph.D. from the University of Oxford and published by the American Association for the Advancement of Science. It examines the effectiveness of restrictions introduced by the governments of 34 European and 7 non-European countries in the period from January to May 2020 [1].

The other study, conducted by a group of researchers appointed especially for the purposes of scientific evaluation of the evidence for the coronavirus pandemic from the Usher Network for Covid-19 Evidence Reviews at the University of Edinburgh, UNCOVER for short, examines the effectiveness of measures introduced between 1^st January and 1^st July 2020 in 131 countries. [2] Most importantly, scientists from the Usher Institute scrutinised not only the effectiveness of restrictions in reducing viral transmissions, but also the impact of easing restrictions on renewed outbreaks of the disease.

The most important conclusions by researchers led by Brauner are the following:

• the only measures with a significant impact on infection reduction (over 35%) are the closure of schools and colleges, and the restriction of gatherings to 10 people or less;
• the closure of businesses offering non-basic products and services had a moderate impact on reducing the number of infections (17.5-35%);
• stay-at-home orders proved to have little effect (less than 17.5%) in reducing the number of cases;
• the closure of bars, restaurants and nightclubs had little effect on virus transmission in 42% of cases and moderate in 58% of cases.

In terms of the effectiveness of stay-at-home orders, one should keep in mind that these measures were usually imposed last, following other restrictions. Brauner et al. took that into account and calculated that in the event of early school closures, a ban on mass events and the closure of some enterprises, the stay-at-home order had little effect on a further reduction of coronavirus transmissions.

Turning to the main conclusions of the team at the Usher Institute, the following points should be mentioned:

• the introduction of a ban on mass events is associated with the biggest drop in coronavirus transmissions;
• in terms of easing the restrictions, a significant upward trend in infections was recorded only after the relaxation of restrictions on school closings and the ban on public gatherings for more than 10 people;
• the reopening of schools is associated with the highest increase of cases diagnosed on the 7^th and 14^th day after restrictions were eased;
• the possibility of organising gatherings of more than ten people is associated with the largest increase on the 28^th day after the ban was relaxed.

The following three basic conclusions can be dound in both studies.

First of all, the most effective means of reducing viral transmission appears to be limiting public gatherings and the on-site activities of educational institutions.

Secondly, the closure of economic activities such as the food catering industry and services has only a limited (low to moderate) impact on the number of infections.

Third, the greatest increase in the number of cases is related to the easing of restrictions on public gatherings above 10 people and the reopening of schools.

The research results summarised above question the validity of the strategy chosen to fight the coronavirus. Maintaining restrictions on economic activity, which have at most a moderate impact on the increase in the number of infections, is associated with an enormous economic and social cost. In spite of the aforementioned conclusions, the plan to lift the restrictions, presented in November, was abandoned – the economic lockdown is still in force, and at the same time, it was decided to partially reopen schools, even though research indicates that it is associated with a significant risk of an increase in the number of infections.

Considering the data and research results presented above, we once again call for the opening of the economy and a revision of the strategy to combat the coronavirus. Restrictions on economic activity have at best a moderate effect on the number of infections. Meanwhile, the prolonged lockdown increases the risk of a massive wave of bankruptcies and layoffs, the negative economic and social costs of which are currently impossible to predict and estimate.

Bibliography:

You Li, Harry Campbell, Durga Kulkarni, Alice Harpur, Madhurima Nundy, Xin Wang, Harish Nair, for the Usher Network for COVID-19 Evidence Reviews (UNCOVER) group, The temporal association of introducing and lifting non-pharmaceutical interventions with the time-varying reproduction number (R) of SARS-CoV-2: a modelling study across 131 countries, in Lancet Infectious Diseases 2020, available online: https://www.thelancet.com/action/showPdf?pii=S1473-3099%2820%2930785-4

Jan M. Brauner, Sören Mindermann, Mrinank Sharma, David Johnston, John Salvatier, Tomáš Gavenčiak, Anna B. Stephenson, Gavin Leech, George Altman, Vladimir Mikulik, Alexander John Norman, Joshua Teperowski Monrad, Tamay Besiroglu, Hong Ge, Meghan A. Hartwick, Yee Whye Teh, Leonid Chindelevitch, Yarin Gal, Jan Kulveit, Inferring the effectiveness of government interventions against COVID-19, in Science Magazine 2020, available online: https://science.sciencemag.org/content/early/2020/12/15/science.abd9338

 

[1] https://science.sciencemag.org/content/early/2020/12/15/science.abd9338

[2] https://www.thelancet.com/journals/laninf/article/PIIS1473-3099(20)30785-4/fulltext#articleInformation

 

See: 20.01.2021 Memorandum of the Union of Entrepreneurs and Employers on the impact of restrictions on coronavirus transmission: opening the economy is associated with a moderate risk of increase in the number of infections

 

ProEXR File Description

Warsaw, 12^th January 2021

 

Trade tax was to level the playing field, but in the electronics/household appliances industry, only Polish companies will pay it

 

The trade tax had two goals: to level the playing field in terms of competition between smaller and larger companies, and to indirectly counteract the expansion of foreign retail chains in Poland. In practice, however, in the electronics and household appliances industry, only Polish companies will pay this tax. Their biggest competitor, the German corporation Media Markt, divided its stores into separate companies and will not pay a penny. This proves that the trade tax will not only fail to achieve the goals intended by the legislator, but will also be a burden to domestic enterprises, thus worsening their position on the market.

The Union of Entrepreneurs and Employers has repeatedly appealed to the government not to introduce any new taxes during the pandemic. We stick to our position and call for the collection of trade tax in 2021 to be stopped. Moreover, the Union has consistently opposed the introduction of sectoral taxes, as well as reminded that the long-term solution to the problems related to tax avoidance lies in a profound reform of the tax system and should consist in the elimination of the corporate income tax and replacing it with a revenue tax.

The effects of introducing such a trade tax are clearly evident on the example of the electronics, household appliances and IT industry. Its characteristic feature is the disproportion between suppliers (global concerns) and sellers (local enterprises). Profitability is in the range between 2 and 4%. The second trade tax rate in the amount of 1.4% will consume a significant part of the profit of household appliances sellers. This in turn will worsen the competitive equilibrium between Polish and foreign enterprises, especially since the latter group will not pay that tax at all.

Discussing the effects of the introduction of the trade tax from 1^st January 2021, it is impossible to ignore the economic consequences of the coronavirus pandemic. It is the position of the Union of Entrepreneurs and Employers that it is incomprehensible and unacceptable to add burdens on enterprises during such an unprecedented crisis. Furthermore, increasing the burdens will also lead to an economic slowdown that we cannot afford at the moment.

In the years 2021-2027, Poland will receive funds hitherto unseen. In the new budget perspective, Poland will receive EUR 160 billion from EU funds. EUR 57 billion will come from the Reconstruction Fund created to help member states face the challenges of the coronavirus pandemic. By comparison, over 16 years of EU membership, Poland received approx. EUR 181 billion. In the light of such enormous funds, it seems obvious that the budgetary pressure to introduce new taxes should be much lower, and the Polish government should not introduce new burdens on entrepreneurs struggling with the effects of a crisis.

 

See report for more: 12.01.2021 Report by the Union of Entrepreneurs and Employers: Effects of the introduction of the retail sales tax from 1^st January 2021

Warsaw, 8^th January 2020

 

Commentary by the Union of Entrepreneurs and Employers:
Either we re-open the economy after 17^th January, or the crisis spreads to all sectors

 

The prolonged lockdown and further restrictions may lead to a real economic collapse. On the macro scale, Poland copes relatively well with the economic effects of the epidemic, but a number of industries – those currently subject to special rigors or a complete ban on operations – are in an extremely difficult situation. Maintaining the currently enforced restrictions after 17^th January 2021 is associated with the risk of a wave of bankruptcies in the sectors covered by those restrictions and the spread of the crisis also to related sectors. Entrepreneurs will not be able any longer to bear the costs of the unpreparedness of the healthcare system for the epidemic – in the second half of January, we should re-open all industries, while maintaining the DDM rigor.

On 4^th March 2020, the first case of the novel coronavirus was diagnosed in Poland. It is, therefore, the eleventh month as companies operate under restrictions, orders and bans, the scope of which is amended every few weeks. We can say with full responsibility that entrepreneurs passed this difficult exam with flying colours: they immediately introduced increased sanitary standards, reorganised their operations, successfully implemented – where possible – remote work, even in the absence of adequate regulations in this area. Some of them are also financially involved in the fight against the virus.

The world of business demanded a quick opening of the economy and the narrowest possible scope of restrictions, but generally followed the standards introduced by subsequent regulations. Thanks to entrepreneurs’ responsible attitude, the government had the necessary comfort to make decisions aimed at enforcing social distancing and isolation.

After almost a year of fighting the pandemic, the situation is quite different. Restrictions and bans that lasted for months have led many entrepreneurs to the limits of financial strength. There is no longer any trace of spring discipline – an increasing number of companies are trying to circumvent, often in highly creative ways, the regulations introduced in connection with the epidemic. No matter how much we advocate abiding by the letter of the law, it is difficult to expressly criticise entrepreneurs trying to survive at any cost. The more so because – unlike last spring – many of them have not received any financial aid yet, despite the fact that they were made subject to new restrictions in October.

Another negative phenomenon is the evident crisis of confidence in the government. The dominant belief is that restrictions are introduced almost at random. No specific argumentation is presented to justify a more restrictive approach to a given sector that they cover. Chaos rules the information policy and the decision-making process – for weeks, new restrictions were announced at the last minute, shy of their introduction. When in November it was decided to somehow structure the strategy to combat the epidemic and present a roadmap for reducing restrictions, the document immediately became obsolete.

At the moment, each day brings reports of a critical situation in new industries. The food catering industry has not been operating normally for almost a year. The fitness industry, although it has learnt to operate under increased sanitary standards, remains completely closed. Regulations regarding stores in shopping centres change every few weeks – immediately after Christmas, many of them were again shut down.

Therefore, it must clearly be said: we have come to a point where it becomes economically too costly to maintain the limits on the economy It would be an oversimplification to say that “Poland is doing just what the rest of Europe is”. Most of the countries that maintain or extend the restrictions are either much wealthier than Poland (e.g. the United Kingdom, Ireland, Germany or France), or are in a much worse epidemic situation (e.g. the Czech Republic). Meanwhile, despite the impressive economic progress, (compared to other Europe countries) we are still relatively poor and, only thanks to social discipline, we managed to stop the uncontrolled increase in the number of infections. Continuing the policy of opening and closing industries on the basis of factors that are difficult to determine may result in us squandering a large part of the achievements from the last three decades.

Considering all the above, the Union of Entrepreneurs and Employers appeals to the Prime Minister and the Minister of Health as well as the team supporting them to unlock all industries after 17^th January 2021. Maintaining restrictions will be associated with the risk of a real crisis and a wave of bankruptcies covering almost all sectors of the economy. We must return to our normal lives. A manifestation of this necessity is the announcement of primary school children in grades 1-3 going back to school. Since we are discussing the transition of some pupils to classroom teaching, we should also make bold decisions in terms of opening subsequent industries.

 

See: 08.01.2020 Commentary by the Union of Entrepreneurs and Employers: Either we re-open the economy after 17th January, or the crisis spreads to all sectors

 

Fot. denisismagilov / Adobe Stock