Warsaw, 10th September 2021
Statement of the Union of Entrepreneurs and Employers on the Polish New Deal tax package
Following multiple comments from the business community, including numerous postulates submitted by the Union of Entrepreneurs and Employers itself, the government has revised part of the solutions contained in the Tax Act implementing the assumptions of the Polish New Deal. While we appreciate and value openness to dialogue, we believes that the changes introduced to the draft act are still insufficient. We would also wish to draw attention to the pace at which this new regulation is being proceeded: the entire text of the draft submitted to Sejm, the lower house of the Polish parliament, is almost 700 pages long. One would think it should be subject to additional, comprehensive public consultations, the duration of which should correspond to the exceptional scope of the proposed act.
We support the increase in the tax-exempt amount as well as the valorisation of the second tax threshold. We also understand that these changes require financing. However, we are not on the same page with regard to the costs of these reforms, that they be borne almost exclusively by Polish small and medium enterprises. Furthermore, entrepreneurs will transfer the higher operating costs to the prices of products they sell and services they render, so that ultimately the benefits for that part of the society for which the tax wedge was to be reduced will be lower than assumed.
While the reduction from 9% to 4.9% of the healthcare premium for people running a proprietary business and paying flat tax is a noticeable reduction, we believe that the introduction of such (full) proportionality is a solution that directly affects Polish business, and indirectly – all consumers. An increased burden on companies translates into higher prices of products and services, and the Polish people are already facing price increases unseen for years.
We also find it rather difficult to comprehend that people who work on account of appointment will be covered by a health insurance premium of 9% of their income, which means that the effective tax rate on income in this group will amount to 41%. This will actually lead to the elimination of this form of taxation, as the overwhelming majority will switch to much cheaper forms of taxation. As a result, the state will lose part of the revenue stream.
In our view, leaving a lump sum healthcare premium for those who pay the flat tax would be the optimal solution. However, if for some reason the regulator deems it necessary to introduce proportionality in healthcare insurance premium for companies, we are convinced that there should be some “ceiling” on the amount transferred by entrepreneurs to the National Health Fund per month.
Although formally the taxes paid to the Fund are called a premium or “contribution”, their amount does not in any way determine the quality or frequency of the benefit. In other words, higher contributions to the healthcare system are not associated with an individual improvement in the quality of procedures. With this in mind, we believe that a maximum “contribution” should be defined and linked to, for instance, the minimum wage. The healthcare premium should amount to no more than, for example, 35% of the minimum wage per month. This way, the scale of increases in the burdens of entrepreneurs (and thus price increases) would be curbed.
The Union of Entrepreneurs and Employers advocated for a revenue tax. The presented solution in the form of a minimum CIT calculated on income is a step in the right direction. We emphasise, however, that, contrary to what was stated in the explanatory memorandum to the government draft act, this tax is not the brainchild of the Union of Entrepreneurs and Employers. Our Union proposed a simple revenue tax, without any reliefs and exemptions, in the form of a so-called Minimum CIT in the amount of 1% of revenues. Ultimately, we propose replacing all CIT with a universal revenue tax. Regardless of the changes introduced to our concept, we do appreciate the willingness to tax international corporations more effectively (and thus to level the playing field regarding competition between multinationals and small Polish companies). We will certainly be monitoring the effectiveness of this regulation, even though it is not the project we authored.
To sum up, we have hopes that changes of an even deeper nature will be introduced to the draft act by the Parliament. We strongly support the introduction of a higher tax-exempt amount and the increase in the second tax threshold. We agree with the solutions adopted in the form of lump sum tax on registered revenue, and we ask for similar ones with regard to appointment work relationships. We also appreciate the reduction in healthcare premiums to 4.9%, but the lack of a limit on its account is a matter we find worrying. And lastly, we approach the minimum CIT with caution, and categorically deny our authorship of this tax in this structure.