Warsaw, 18^th February 2021

 

Position of the Union of Entrepreneurs and Employers on the advertising tax

 

The Union of Entrepreneurs and Employers is critical of the proposal to introduce the advertising tax and calls for further works on the project to be abandoned. Our motivation is two-fold and consists of the following key factors: we are against sectoral taxes as well as oppose the introduction of any additional burdens during an epidemic or over the course of economic recovery. Meanwhile, the proposed tax would be another new fiscal obligation for companies, introduced in a relatively short time, in spite of the first economic recession in Poland in thirty years.

First of all, we would like to address to the very title of the act itself and the terminology used within. For we are dealing here with yet another case of introducing a new tax without actually calling it a tax. Recently, the “sugar levy” and the “solidarity tribute” had been adopted – this time the new tax was called the “advertising premium”. There can be no doubt whatsoever that the purpose of all the above-mentioned taxes is of a fiscal nature, even if the revenues from these taxes, in theory, are not transferred directly to the national budget, but to individual funds. The proceeds that end up in the National Health Fund support the state budget, as they effectively reduce the necessary subsidies from the budget to the Health Fund. Revenue directed to other funds lessens the pressure on the budget in the areas covered by those funds. The creation of such a structure leads to a real, gradual increase in burdens imposed on Polish citizens (the solidarity tribute is a direct blow to personal income; other taxes are easily passed on to consumers too). Consistent avoidance of calling these taxes by name, raises the suspicion that it is the government’s aim to keep the public opinion convinced that there are no new burdens – a deleterious practice and we as the Union evaluate it unequivocally negatively.

The mode how the draft act is being processed also raises our doubts. At the moment, it is in the “pre-consultation” phase, which is a welcome practice in the case of predictable, exemplary legislative processes. As a rule, however, the subject of a pre-consultation is a document discussing the assumptions of an act, presenting key concepts and intentions of the legislator. Meanwhile, as part of the currently ongoing pre-consultation, opinions are already being given to a specific draft legal act along with an explanatory memorandum. Moreover, one should note that the presented act concerns an exceptionally wide group of entities, both representatives of traditional media and digital platforms or producers (and therefore advertisers) of products considered to be qualified goods. Nevertheless, as part of the pre-consultation, there are only 14 days provided for comments. It would be reasonable for the Ministry of Finance to clearly indicate the further legislative path envisaged for the discussed draft act. If no decision is taken to withdraw from further works, it seems most appropriate to apply the government legislative process and regular public consultations, then prepare a report in which the authors would address the comments and organise a consensus conference with all interested parties. This is the only way one can conceive of a reliable legislative process relating to a draft act of such a broad scope.

As we have mentioned at the beginning, the Union of Entrepreneurs and Employers is against sectoral taxes. We do not at all understand why the legislator chose to impose this new particular levy on the (very broadly understood) advertising industry. Nowhere in the explanatory memorandum to the draft act is the selection of companies to become taxpayers of the new tax backed by argument. This is all the more surprising as, for example, the outdoor advertising sector has experienced a decline in revenues of several dozen percent as a result of the pandemic. Small and medium-sized companies in this industry may not survive additional burdens, especially in the context of a gradually declining market share and a high share of fixed costs in budgets (for instance, long-term lease contracts for outdoor advertising purposes with specific amounts and rates). Similar problems can be noticed, for example, on the television advertising market, where smaller broadcasters may particularly be affected by this new tax, as their revenues are mainly based on advertising.

No justification was also provided in the case of “qualified goods”, the advertising of which is to be subject to a higher tax rate. Merely in the communique accompanying the published draft act, together with the explanatory memorandum, one can find a piece of information that the higher rate will apply to revenues from advertising of goods that are “detrimental to one’s health”. This is a surprising criterion, largely due to the products to which it is to apply. Beverages containing sweeteners are already subject to the sugar tax, the proceeds of which, in accordance with that act, contribute mostly to the National Health Fund. Only in January 2021, beverage producers paid sugar tax to the Fund in the amount of several dozen million zlotys. Therefore, the proposal to re-cover them with an additional levy, also contributing to the National Health Fund, is unacceptable and in practice leads to multiple taxation of the same products.

Similarly, it is difficult to find a rational justification to support the selection of products that are “detrimental to one’s health”, and the authors of the project themselves are far from helpful in this matter, as one can find medicine and dietary supplements there too. The conclusion that medicinal products (legally approved to be sold and purchased) or dietary supplements (subject to registration procedures and supervision of the Chief Sanitary Inspectorate) are goods that are harmful to one’s health is impermissible and devoid of any substantive basis. With regard to the presented catalogue of qualified goods, it is possible to raise the issue of unequal treatment of entities operating on the market by discriminatory and arbitrary justification bereft of substance, by means of higher rates of advertising revenues for certain products.

What is also noteworthy are the (in all probability, unintended) other side effects of the approach proposed by the legislator. Having analysed the structure of the agri-food market, we can claim, for example, that the solutions presented, by leading to an increase in advertising costs, will in a way of their own hamper the competitiveness of branded products compared to products sold under private labels of stores.

Following up on our arguments regarding the sectoral character of the proposed tax, it is impossible not to mention the excerpts of the draft that resemble the assumptions found in the previously proposed so-called digital tax. The Union of Entrepreneurs and Employers had already addressed this concept many a time and our position on this matter has remained unchanged. We believe that there is no rational reason to additionally burden an arbitrarily selected sector of the economy. Especially since there is no evidence that tax avoidance is more commonplace or severe among digital companies than within “traditional” sectors of the economy. Furthermore, one could make an effort to try and justify the argument (basing on publicly accessible data of the Ministry of Finance) that regarding the generated income, some global digital companies pay CIT in amounts even several times higher than the average Polish taxpayers.

Regarding the section of the project on online advertising, a number of aspects specific to this area should also be discussed. In the draft, advertising services rendered on the Internet are vaguely defined as “any digital services relevant to advertisement targeting”. It is an exceptionally broad and capacious description. It would be difficult to precisely determine the scope of digital services related to targeting an advertisement to recipients, let alone determine which of them are “relevant” for the targeting process. Such a definition may make the correct application of the regulation impossible. What raises further doubts is the proposed mechanism of identifying advertising recipients, which would require both taxpayers and tax authorities to process enormous amounts of data, often imprecise and in certain cases (as of now) not at all aggregated. This is another aspect of the regulation that may generate key interpretation disputes that would make its correct application extremely difficult or even impossible.

To summarise the argumentation stated above, tax optimisation schemes and CIT avoidance are common phenomena in a globalised economy and do not relate to any specific sector. If the legislator has observed a problem (one that is actually real) with the structure of the corporate income tax, we propose to consider an initiative in the field of a universal revenue tax that is difficult to avoid.

Ultimately, the project is to introduce an additional burden in the course the fiscal year. Moreover, during a pandemic. Entrepreneurs are once again surprised by a proposal to introduce a new type of levy – as a result, the principle of trust in the state and its laws seems to have been severely violated. Most OECD countries decide to reduce the fiscal burdens during the current pandemic. We have observed with growing concern that the Polish legislator, contrary to this universal trend, would rather aim at the introduction of novel taxes, while simply refusing to call them as such. All in all however, contrary to the claims made in explanatory memoranda and various announcements, the economic cost of all these new burdens will in practice be borne by consumers. Therefore, the purchasing power of wages and the financial situation of households are both going to deteriorate – all this during an epidemic that made the unemployment rate soar to 6.5%.

Furthermore, the short vacatio legis deserves to be strongly criticised. The proposal that the new burden should enter into force later this year, as early as July, is unacceptable.

To sum up, the Union of Entrepreneurs and Employers calls for the works on the new tax to be abandoned. We oppose the introduction of any sectoral burdens, and proposing new taxes during an epidemic is both contrary to our concept of counteracting its negative economic effects as well as stands in opposition to the practices of most OECD countries. Besides, the proposed solutions are discriminatory against specific categories of economic entities. We are open to a discussion about tightening the tax system and we have our own idea how to do it: a universal revenue tax. However, we are against a burden, introduced in an ad hoc manner, on arbitrarily selected sectors, under the misleading banner of “premiums” to support healthcare, culture or protection of historic monuments. Especially since the costs of the new advertising tax will easily be passed on to producers (sometimes of key categories of goods, such as food or medicines), and later to consumers. As with any increase in burdens, its effect will therefore be prices going up and the purchasing power of households going down.

 

See more: 18.02.2021 Position of the Union of Entrepreneurs and Employers on the advertising tax

Warsaw, 25^th February 2021

 

Social partners call to open up the economy while maintaining sanitary regime

 

Organisations of employees and employers, members of the Social Dialogue Council, are calling for the remaining sectors of the economy that remain in the state of lockdown to be opened. At the same time, we call for the implementation of sanitary restrictions adequate to the nature of individual industries. Employees and employers alike are willing to follow the sanitary regime worked out in past months.

The hitherto conduct of both employees and entrepreneurs in times of the COVID-19 epidemic proves that representatives of all industries are able to run their operations at full speed in a prudent manner and taking into account the current state of the epidemic. Recent days have shown that there are no violations of the sanitary regime within industries unlocked in mid-February this year. There are no substantive grounds to differentiate the situation of employees and entrepreneurs from particular industries or sectors.

Decisions consisting merely in restricting business operations of enterprises weaken the Polish economy, which is largely made up of small family businesses. No form of administrative support will replace the entrepreneurs’ relations with their employees, contractors, and consumers – the basis of life in social and economic terms. Therefore, each subsequent day of restrictions is causing irreversible changes. The progressing economic stagnation will result in an increase in unemployment, a spiralling debt of companies, and their subsequent bankruptcies.

For this reason, we call for reason and ask that all employees and companies be allowed to operate on an equal and fair basis. We are ready to act jointly and responsibly, while maintaining all measures whose purpose is to control the scale of the epidemic.

 

See more: Social partners from the Social Dialogue Council call to open up the economy while maintaining sanitary regime

 

fot. Álvaro Serrano / Unsplash

Warsaw, 24^th February 2021

 

EESC Activities Report no. 1/21

Marcin Nowacki, President of the European Enterprise Alliance and Vice-President of the Union of Entrepreneurs and Employers, and Tomasz Wróblewski, President of the Warsaw Enterprise Institute, are members of the European Economic and Social Committee (EESC), an EU advisory body which represents employers’ and employees’ organisations in the EU lawmaking process. We present a summary of their activities in January 2021.

On 27 January, a debate with Maroš Šefčovič, Vice-President of the European Commission responsible for interinstitutional relations and forecasting took place. Šefčovič presented the Commission’s work programme for 2021. Marcin Nowacki raised the issue of passing on the burden of the digital tax on to consumers and SMEs. He asked Šefčovič whether the Commission foresees any measures to evaluate the cost of digital regulations.

In addition, Nowacki raised the question of logistical and legal challenges related to the carbon adjustment border mechanism. He noted that the design of the levy essentially requires a determination of the carbon emissions associated with each product, and asked whether the Commission is prepared for the difficulties arising from disclosing the details of supply chains.

Also on 27 January, a meeting took place with António Costa, Prime Minister of Portugal, who presented the priorities of the current Presidency of the European Council. Tomasz Wróbleski inquired about the legitimacy of ambitious social goals during the economic crisis caused by the coronavirus pandemic.

 Regulatory activity

 EESC members are also active in the regulatory field. The EESC issues opinions on subjects referred to it by the EU institutions. In addition, EESC members can propose the adoption of own-initiative opinions.

Marcin Nowacki has become rapporteur for the EESC opinion on the EU Strategy to harness the potential of offshore renewable energy for a climate neutral future, prepared by the Section for Transport, Energy, Infrastructure and the Information Society (TEN). The Offshore Strategy defines EU priorities for the next 30 years and sets very ambitious targets, according to which the share of offshore wind energy in the EU energy mix in 2050 will exceed 16%.

Useful links:

1. Overcoming the COVID-19 pandemic permanently, as well as the economic recovery;
2. The EU Strategy to harness the potential of offshore renewable energy for a climate neutral future

Additionally, Mr Nowacki tabled three own-initiative opinion proposals. The first opinion proposal concerns support and cooperation of the European Union with Belarusian entrepreneurs, workers and civil society. It aims to provide an expert assessment of the current situation in Belarus from the perspective of civil society and the expectations of Belarusians regarding the actions of the European Union. It could help the relevant EU institutions decide how best to target and direct EU support and, in the long term, lay the foundations for future EU-Belarus relations.

The second proposal for an opinion is related to the assessment of the integration process in light of the Association Agreement between the European Union and Ukraine. The aim of the opinion is to formulate practical recommendations that will bring the views of civil society closer and help the EU institutions to increase the effectiveness of the EU-Ukraine Association Agreement. 

The third proposed Opinion is to assess the impact of the Nord Stream 2 project on the Energy Union. The opinion will gather stakeholder views on the impact of the Nord Stream 2 gas pipeline on the EU’s energy security.

More information about the EESC

What is EESC?

The European Economic and Social Committee (EESC) is an EU advisory body comprising representatives of employers’ and workers’ organisations and other interest groups. It issues opinions on EU issues to the European Commission, the Council of the EU and the European Parliament, thus acting as a bridge between the EU’s decision-making institutions and EU citizens.

What does the EESC do?

It gives the interest groups a formal say on EU legislative proposals. Its three key tasks are to:

• Ensure that EU policy and law are reflect to economic and social conditions in the Member States.
• Engage in dialogue with employers’ and workers’ organizations from all member states.
• Promote European integration and participatory democracy.

What is the EESC composition?

The EESC has 329 Members from all EU Member States, who are appointed for a renewable five-year term of office. Members are nominated by national governments and appointed by the Council of the European Union. They are independent and perform their duties in the interest of all EU citizens. The number of Members per country is in proportion to the country’s population.

How does the EESC work?

The EESC is consulted by the European Parliament, the Council of the EU and the European Commission on a variety of subjects. It also issues opinions on its own initiative.

Members work for the EU, independently of their governments. They meet 9 times a year. Opinions are adopted by a simple majority vote.

Meetings are prepared by the EESC’s specialized sections and the consultative commission on industrial change. The EESC’s specialist think-tanks (known as ‘observatories’) track the progress of EU strategies.

The EESC keeps in touch with regional and national economic and social councils throughout the EU – mainly to share information and discuss particular issues.

See more:  EESC Activities Report no. 1/21

fot. Giampaolo Squarcina / ma lic. Flickr.com

Warsaw, 9^th February 2021

 

Memorandum of the Union of Entrepreneurs and Employers:
Let us abolish the minimum wage in micro-enterprises

 

• Smallest of enterprises are hit hardest by the pandemic. The livelihood of many is at risk. Let us help them by eliminating the minimum wage in micro-enterprises.
• For the same purpose, a simple method of taxing companies generating revenues not higher than PLN 120 thousand annually should be introduced: a uniform 20% revenue tax, covering PIT and social contributions.

The Union of Entrepreneurs and Employers has repeatedly described the destructive impact on the economy of both the pandemic and the restrictions on business activity. Although the statistics are not extremely bad on the macro scale (despite the fact that the first recession in thirty years is a fact), some industries are feeling the effects of the pandemic particularly severely. As it usually happens in most cases, micro-enterprises are exposed to the highest risk of bankruptcies and layoffs. They do not have the financial reserves necessary to survive such a difficult time.

We emphasise the fact that some of the sectors subject to restrictions are to a large extent made up of the smallest of entities. Moreover, some of these companies may be excluded from the possibility of applying for key support instruments due to failure to meet certain criteria on their part (including – above all – the criterion of employment based on a contract). This is to a high degree due to the specific nature of business operations, and mainly a result of seasonality or the team being students or young people just entering the labour market. This is relatively commonplace in the services sector, and this is the exact sector that is most affected by the enforced restrictions.

We fear that the prolonged restrictions (that we have been consistently against) may lead to a collapse of the Polish microbusiness. With this in mind, we believe it to be a reasonable solution to introduce a programme aimed precisely at supporting the smallest entrepreneurs. We propose that this programme consist of at least two elements, which are presented below.

1) A return to the original concept of „small business”

Already a few years ago, the Union of Entrepreneurs and Employers designed a solution to help the smallest economic entities. For them, the obligation to pay flat-rate social security contributions, regardless of their revenue, is associated with a decrease in profitability to a point where it becomes a real challenge. Needless to say, for most entrepreneurs, the flat-rate social contribution is a favourable solution, but in case of the above-mentioned group, the necessity to pay the yearly increasing amounts is a source of real problems in staying in business.

We have proposed that entrepreneurs running a sole proprietorship on the smallest scale (revenues not exceeding several dozen thousand zlotys per year) should be able to settle accounts with the Tax Office and the Social Insurance Institution by means of a uniform, simple levy paid on revenue, including both the income tax and all due contributions.

Our postulates were somewhat reflected in the “small ZUS plus” formula (ZUS – Social Insurance Institution) introduced by the government. This relief has evolved, but even in its current, extended form, it does not take into account all the elements contained in our concept. First of all, as its name suggests, it only applies to social security contributions, while the original “small business” proposal also included income tax. The structure of the solution itself is also different – instead of a simple product of the rate and the income achieved in a given month, “small ZUS plus” requires the determination of the average monthly income from business activity, multiplying it by a factor of 0.5 and – ultimately – comparing the result with the amount of 30% minimum wage and 60% of the forecast average monthly wage.

The more complicated structure aside, the main difference between the implemented concept of “small ZUS plus” and the idea of “small business activity” presented by the Union of Entrepreneurs and Employers is the fact that the discussed relief in social insurance contributions is limited in terms of time: it can only be benefited from for three years over a five-year period.

As a result, the problem of the smallest companies generating low revenue (from which a small amount remains in the owner’s pocket having paid all due public levies) remains valid. The key advantage of the concept promoted by the Union is it being a systemic solution. Henceforth, we believe that the minimum plan is to resign from the time restriction on the “small ZUS plus”. Ultimately, one should strive to implement the original idea to regulate “small business”, so that the smallest entities can settle accounts in a simple way, and their burden is directly dependent on the revenue generated. The rate of such a tax should come up to approximately 20%. For a considerable part of the smallest enterprises, this will be a lower total burden than the cumulative amounts of social security and personal income tax contributions.

2) Minimum wage abolition in micro-enterprises

Despite the fact that the labour market has coped relatively well with the problems caused by the coronavirus epidemic, the first obvious signs of its weakening condition are already visible. Unemployment registered in January reached the level of 6.5%, the highest in several years. The number of new job offers is also gradually decreasing. In the autumn of 2020, their number was on average over 25% lower than the year before.

It might be worth to emphasise the fact of partial regionalisation of the problem of unemployment, resulting from, among others, a relatively stronger impact of the pandemic on, for example, resorts. For instance, in the Kołobrzeg poviat, the registered unemployment rate increased due to the pandemic threefold (sic!).

One also has to note that industries subject to restrictions (food services, hotels, pubs, cultural institutions etc.) are sectors in which a significant part of youth, including students, traditionally gain their first working experience. Layoffs resulting from, for example, an administrative ban on conducting business activity are a lot harsher for these employees as it is much more difficult than in normal circumstances to find an alternative job. In the world before the COVID-19 pandemic, a young person starting a career e.g. in a restaurant could easily find other employment in a bar, a cinema or a hotel, if necessary. In the new reality marked by a lockdown, their possibilities are not endless.

The conclusions stated above are increasingly often confirmed by experts who claim the coronavirus epidemic affects young people active in terms of work the most. This is an observation not limited to Poland, but valid globally, especially since most countries decided to introduce similar bans or restrictions.

Bearing in mind the arguments listed above, we believe that it is worth putting safety measures in place in order to mitigate the risks for the labour market resulting from the difficult situation caused by the pandemic. Presently, many entrepreneurs still keep jobs, contrary to the economic calculation. It will not be long, however, before ruthless calculation will force them to cut jobs, and this may rapidly affect industries whose activities are limited. As a consequence, a return to double-digit unemployment rates unseen in Poland for years is possible. In circumstance like those, it would be difficult for young (inexperienced) and low-skilled people to find employment.

To prevent this scenario from happening, we propose a bold move to be considered: the introduction of a threshold based on enterprise size, from which the minimum wage provisions would apply. To a certain degree, a similar solution exists in the United States, where the federal minimum wage regulations apply to companies with annual revenues exceeding USD 500,000. In Poland, the starting point of reference could be micro-entrepreneurs. The discussion on the threshold beyond which an entrepreneur would be bound by the provisions regulating the minimum wage, however, should remain open.

To sum up, the Union of Entrepreneurs and Employers would like to emphasise that the pandemic may lead to the collapse of micro-entrepreneurship in Poland. It is difficult to evaluate the scale of this phenomenon or its duration at this very moment, but there is no doubt that a proposal to introduce a regulatory support programme for micro-enterprises is a justified course of action in order for them to survive this difficult time and to recover after the epidemic. We believe that both concepts presented above: the return to the idea of “small business” and the exemption of the smallest of companies from the scope of the provisions regulating the minimum wage, have the potential to serve this purpose.

 

See more: 09.02.2021 Memorandum of the Union of Entrepreneurs and Employers: Let us abolish the minimum wage in micro-enterprises

Warsaw, 10^th February 2021

 

Statement of the Union of Entrepreneurs and Employers on the media tax

 

The Union of Entrepreneurs and Employers has for years been critical of all sectoral taxes. The proposed media tax is no exception from that rule, and therefore Union strongly opposes its introduction.

Furthermore, the Union opposes any and all new burdens introduced during the fight against the coronavirus epidemic. The media tax is another one of them. In our view, this is yet another reason to oppose its introduction.

By introducing sectoral taxes, the government as a rule refers to the necessity to impose burdens on those companies that apply tax optimisation schemes and, as a consequence, avoid income tax. This argument is also used to justify the idea of a tax on advertising, also known as the media tax.

If the above-specified justification actually were the legislator’s intention, the Union of Entrepreneurs and Employers wishes to remind that it has for years been proposing a real remedy to the problem of tax avoidance: a simple tax system based on a revenue tax that is difficult to avoid as well as easy to calculate and collect. A complete set of information regarding our views in this regard along with a concept of a comprehensive tax system reform are available on our website www.podatkiminus.pl.

If the state really wants to combat tax optimisation, a revenue tax should be introduced instead of adding sectoral taxes whose consequences the consumers will have to suffer.

 

See more: 10.02.2021 Statement of the Union of Entrepreneurs and Employers on the media tax

 

Fot. Tierney / Adobe Stock

Warsaw, 11^th February 2021

 

“Lockdown Loss Meter” hanged in Warsaw. What amount does it show?

 

On the façade of the Warsaw-based pub “Świetlica Wolności” (The Freedom Lounge), several screens making up the Lockdown Loss Meter were hanged. In total, since March 2020, the Polish economy has already lost over PLN 30 billion as a result of the lockdown.

The unfreezing of the economic – scheduled for 12^th February 2021 – is only partial, as it concerns cinemas, hotels, theatres and ski slopes, and temporary, because the return to the restrictions after 2 weeks is a real possibility. What this means is that the Polish economy is still struggling with a creeping lockdown. The Lockdown Loss Meter shows in real time the cumulative economic loss in terms of lost income since the first lockdown in the spring last year, as well as it informs in detail about the losses in four critical industries that either were or are ‘frozen’ (restaurants and related businesses, fitness, entertainment, hotels). The Meter is going to be updated depending on the current changes in the sanitary regime. Its creators, the Warsaw Enterprise Institute and the Union of Entrepreneurs and Employers, believe the losses incurred as a result of the lockdown were unnecessary The economy should function continuously provided a stricter sanitary regime is maintained.

The calculations by WEI and the Union indicate that the spring lockdown caused the greatest damage to the economy. At that time, Poland’s GDP decreased by 0.74%. The decrease was mainly induced by restrictions in retail trade and the related closure of shopping centres and agri-food markets. The drop in value added generated by the retail trade sector reached PLN 5.47 billion. Being an indirect effect, further drop values also occurred in sectors related to retail trade: wholesale trade – PLN 4.10 billion, industry – PLN 0.45 billion, energy – PLN 0.17 billion, and transport – PLN 0.21 billion. In the case of individual services, such as hairdressers and beauticians, losses resulting from the spring lockdown amounted to PLN 1.03 billion. Such sectors as entertainment and culture, tourism, sports and recreation, air transport and hotel industries also recorded steep declines.

According to preliminary estimates of the Central Statistical Office of Poland, the gross domestic product (GDP) in 2020 was lower in real terms by 2.8% compared to 2019. Of course, this decline is not only the result of economic restrictions, but also of a decline in foreign demand and consumer moods as well as increased sanitary precautions. However, the Meter – whose operations are based on the input-output model – sifts these phenomena away, focusing only on the losses caused by the lockdown. It takes into account not only the income lost in frozen industries, but also the indirect impact that freezing them had on other sectors.

The Meter is also available online: http://licznik.wei.org.pl/

It will be taken down when the last industry is ‘unfrozen’ and all lockdown policies finally abandoned.

 Warsaw, 5th February, 2021

 

Debrief: ‘Protectionism within the European Union and how to tackle it’

 

The single market is one of the greatest achievements of the European Union. Nevertheless, independent studies conducted by the European Commission and the Union of Entrepreneurs and Employers show that protectionism is a serious problem affecting the majority of entrepreneurs and hindering the development of the single market. Elimination of existing barriers could attract an additional €17 billion of investment per year and generate another 1.3 million jobs – keys to restoring the competitiveness of the European economy in the aftermath of the pandemic. Both studies show administrative practices (i.e. requirement to present additional certificates) rank as top protectionist measures. While most of them can be addressed through prohibitions established under the EU law, the current legal framework seems insufficient to cope with all the problems of the single market. During the webinar, distinguished panelists brainstormed solutions on improving the quality of the internal market.

The discussion which took place on 5 February 2021 via ZOOM, gathered Mr. Horst Heitz, the Chair of the Steering Committee of the SME Connect as well as 3 members of the European Economic and Social Committee – Ms. Jana Hartman Radová, the Head of Brussels Office of Confederation of Industry of the Czech Republic, Mr. Marcin Nowacki, the President of the European Enterprise Alliance and Mr. Tomasz Wróblewski, the President of the Warsaw Enterprise Institute.

Research conducted with the participation of over 1150 entrepreneurs from Poland, the Czech Republic and Slovakia has shown that almost 40% of the surveyed companies have experienced encountered protectionist measures within the European Union. Administrative burdens as well as the requirement to present additional documents (certificates, attestations etc.) are some of the most common practices encountered.

Most of these practices can be addressed through a wide range of restrictions contained in the European law as well as the rich jurisprudence of CJEU. However, the current legal framework does not seem to be sufficient to address all the problems of the common market for several reasons. For instance, the current regulations are insufficient to address the problem of greater meticulousness in enforcement of laws in case of foreign companies.

One of the Union of Entrepreneurs and Employers ideas for improvement of the quality of the internal market is the introduction of a horizontal direct effect on the free movement of goods. This will open the path for these provisions to be invoked in disputes between private persons before national courts, thus revolutionizing the functioning of the common market and enabling the restoration of competitiveness of the European economy.

 

Watch our webinar: “Protectionism within the European Union and how to tackle it”. 

 

fot. Giampaolo Squarcina / ma lic. Flickr.com