Warsaw, 18^th January 2022

 

APPEAL OF CEZARY KAŹMIERCZAK, PRESIDENT OF THE UNION OF ENTREPRENEURS AND EMPLOYERS, TO THE EUROPEAN COMMISSION REGARDING EUROPEAN RECOVERY FUND

 

Madame Commissioner,

The last couple of years has been an exceptionally tough time for both Europe and the entire world. The challenges that stem from the coronavirus pandemic are not only health-related but also of a social and economic nature. Widespread recession, albeit short-lived, made it necessary to undertake non-standard measures in the field of monetary and fiscal policy. Launching immense aid programmes for enterprises and maintaining exceptionally low-interest rates have saved many businesses from bankruptcy and communities from impoverishment. However, they have not entirely mitigated the negative impact the pandemic has been exerting on economies. In many countries, the pandemic has highlighted the necessity of major reforms to the healthcare system, public services, or digitisation of public offices in the most brutal way.

All this led the European Union to propose an ambitious aid programme for Member States to help post-pandemic recovery. It is to be achieved, among others, by the Recovery and Resilience Facility.

In the preamble to the regulation establishing the Facility, it is stated that it aims to provide “effective and significant financial support to step up the implementation of sustainable reforms and related public investments in the Member States” and its ultimate objective is “to tackle the adverse effects and consequences of the COVID-19 crisis in the Union”.

The nature of the challenges the Facility is addressing is beyond politics. A consensus was achieved regarding the need to rebuild and maintain the competitiveness of the European Union and its economic cohesion, which goes beyond current national policies. Therefore, I am deeply convinced that the actual implementation of the Facility, by providing Member States with the funds allocated to them, should disregard the current relations between European institutions and representatives of individual countries.

It is no secret that there are disputes between certain Member States and the European Commission regarding, inter alia, the principles on the functioning of the Community or restrictions of individual countries’ sovereignty. In the case of Poland, this discussion to the greatest degree revolves around the changes introduced to the judicial system. In any well-functioning organisation, a dispute is nothing out of the ordinary. We should not avoid it, and all parties involved have the undisputed right to formulate opinions (even adamant ones) or to draw conclusions and consequences in the scope of mutual relations.

For this reason, I am increasingly concerned that the Recovery and Resilience Facility, despite its essentially apolitical nature, has become part of the ongoing dispute between the Polish government and the European Commission, and an argument of sort. Hence, I would like to express my strong opposition to this practice.

Social partners in Poland have frequently commented on the so-called reform of the judiciary system in recent years. However, I cannot accept a situation in which citizens of Poland and Polish businesses have become hostage to a largely political dispute between EU bodies and the Polish government. Discourse on the rule of law or the principles of the functioning of the EU can and should continue. I am convinced, however, that the European Commission has a full range of measures at its disposal to advocate its reasoning without endangering the Polish – and, consequently, the European – economy, risking a slower come back to the path of growth disrupted by the COVID-19 pandemic.

I call for the funds entirely due to Poland, which completed all the procedures required by the relevant regulation, to be mobilised under the Recovery and Resilience Facility and  stop using them to influence the Polish government. Such practices can only reinforce the narrative of distrust aimed at EU institutions and lead to further polarization in relations between Poland and the EU, as well as among Polish citizens itself. At the end of the day, it is the Polish citizens and entrepreneurs, who will lose the most.

Yours faithfully,

Cezary Kaźmierczak
President of the Union of Entrepreneurs and Employers

See more: 18.01.2022 Appeal of Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers, to the European Commission regarding European Recovery Fund

Warsaw, 5^th November 2021

Position of the Union of Entrepreneurs and Employers on the draft act amending the Act on Foreigners and certain other acts

The draft act amending the Act on Foreigners and certain other acts was submitted to the Sejm on 22^nd October 2021. Already on 26^th October 26, it was sent to appropriate committees for its first reading. Apart from the Act on Foreigners, it also introduces changes to the following acts: on Repatriation, on Employment Promotion and Labour Market Institutions, on Healthcare Benefits Financed from Public Funds, and on Stamp Duty. In the draft act, there are a number of changes that will impact the both the legal situation of foreigners and their everyday lives, including work permits and related procedures.

The Union of Entrepreneurs and Employers decided to scrutinise the proposed changes. In our view, they are certainly beneficial and, to a large extent, a major step towards improving the situation of foreigners on the Polish labour market. Nonetheless, the proposals are insufficient and, in some respects, increase formalism and complexity of provisions regarding foreigners’ ability to enter the Polish labour market.

A crucial and desired change is to abandon the requirement to have a stable and regular income (thus far provided for in Art. 114 sec. 1.2) along with a place of residence (Art. 114 sec. 2) in the procedure to obtain temporary residence and a work permit. Certainly, such a solution should be considered a helping hand, because when foreigners decide to find employment in Poland, they will no longer be forced to have a place of residence and therefore long-term financial obligations. Furthermore, while the requirement to have a stable and regular income has been removed, Art. 114 sec. 1.4 remains guaranteeing that entities entrusting work to foreigners will provide them with remuneration which (in accordance with the proposed amendment to point Art. 114 sec. 1.5 of the Act on Foreigners) “is not lower than the minimum amount of remuneration for work, regardless of the working hours or type of legal relationship being the basis for the performance of work by a foreigner”. Such a solution is legally consistent and simplifies existing rules.

Amendments to Art. 119 and Art. 120 of the Act on Foreigners are welcome changes too that we evaluate positively. The amendment to Art. 119 will allow foreigners to perform work after the existing civil law contract is transformed into an employment contract, after changes to job post name while retaining the current scope of duties or increasing the working time provided it results in a proportional increase in remuneration. On top of that, pursuant to the amended Art. 120, foreigners working in Poland will not have to re-apply for a work permit as it is the case presently in the event of change to the entity they work for, because the existing one will suffice.

Undoubtedly, one of the draft acts key provisions is the amendment to Art. 88z of the Act on Employment Promotion and Labour Market Institutions. According to the new wording of sec. 2(3), entrusting work by means of an employer’s declaration is to be extended from 6 months to 2 years. This is a welcome change indeed, as it will eliminate the extremely high rotation of employees benefitting both employers and employees. The latter will gain greater stability and job security in the long term. It will certainly allow them to better assimilate and perhaps even encourage them to stay in Poland for a long time. The former, on the other hand, will not have to bear costs associated with frequent rotation of employees, such as recruitment, training etc.

Nevertheless, the question regarding potential future of employees at the end of the 2-year-long employment period on the basis of a declaration of entrusting work to a foreigner remains open. We believe there ought to be a mechanism enabling a foreigner to obtain a work and residence permits conveniently, regardless of the type of work performed and without the so-called labour market test (the procedure of verifying whether the employer’s staffing needs can be satisfied locally). This procedure does not meet the needs of the contemporary Polish labour market, which urgently needs an influx of workforce, that is, workers willing to settle in our country for a long time, looking for employment and starting families. We need to fill the generation gap leading not only to an economic slowdown, but also a growing burden on the social security system.

The Union of Entrepreneurs and Employers presented its proposals in this respect in our report “Poland’s migration policy – necessary directions for changes” ¹. They include, among others, the introduction of a “white and red card” which is a document confirming the right to stay and take up employment by a foreigner. It would be initially issued for a period not longer than 3 years, and later extended indefinitely if the foreigner meets specific criteria, such as no criminal record.

All in all, the Union of Entrepreneurs and Employers positively evaluates the draft act on the amendment to the Act on Foreigners and certain other acts in the form presented by the Polish Prime Minister. It certainly is a step in the right direction. However, we need a comprehensive immigration strategy which would take into account: the change in the model of immigration to Poland (from short-term and fast-rotating to permanent), the need to secure our domestic borders, and the necessity to control the dynamics of immigration processes. With this in mind, it would be reasonable to extend the proposed changes to include an easy path to change the declaration to entrust work to a foreigner into a work and residence permit.

***

 

Find out more: 05.11.2021 Position of the Union of Entrepreneurs and Employers on the draft act amending the Act on Foreigners and certain other acts

Warsaw, 25^th November 2021

Commentary of the Union of Entrepreneurs and Employers
on the announcement of the “Anti-Inflation Shield”

Prime Minister of the Republic of Poland Mateusz Morawiecki presented today his plan to introduce an “Anti-Inflation Shield”. This package of solutions consists to a large extent of a series of temporary tax cuts, mainly concerning VAT and excise duty. The initiative to reduce these burdens considering rapidly growing inflation is in our view worth supporting. According to data from Statistics Poland, in October 2021, prices increased year-on-year by as much as 6.8%. This is a record high level, unheard of in years. Moreover, according to some forecasts, inflation is expected to continue to rise and in January 2022 it may even reach a double-digit level¹. This situation requires urgent intervention. Apart from monetary policy, there are also fiscal tools at the government’s disposal, and it is good news they decided to make use of them.

In terms of fuel prices, an excise duty reduction was announced to the minimum level permitted in the European Union to being on 20^th December 2021 and to last until 20^th May 2022. Minimum excise duty on fuels is set out in Council Directive 2003/96/EC of 27^th October 2003 restructuring the Community framework for the taxation of energy products and electricity (known as the Energy Taxation Directive), and it is different for each type of fuel. The second solution aimed at reducing fuel prices is the retail sales tax exemption from 1^st January to 31^st May 2022. The so-called “emission fee” is also to be temporarily abolished. These measures are to reduce fuel prices by PLN 0.2-0.3 per litre. It will not only impact drivers, but the whole industry and all consumers as transport costs are included in the price of virtually all goods.

Moreover, VAT on natural gas is to be reduced from 23% down to 8%. Natural gas is one of the most important energy resources used, among others, to heat households, water, and gas stoves. It is also of key importance in the energy industry. It is estimated that for households, a VAT reduction may translate into lower bills to pay – by several up to even several dozen zlotys per month. In terms of electricity prices, VAT will be reduced from 23% down to 5% in January 2022, whereas excise duty will be brought down to 0%.

Obviously, the reduction of costs which is to result from changes in tax on energy carriers is a step in the right direction. Rising energy prices are responsible for a significant part of the overall price increase – the reasons for these increases lie largely beyond the control of the state authorities. However, tax reduction is a mechanism that equalises these increases.

Another of the PM’s announcements we find praiseworthy is the introduction of savings in public administration. At this stage, we are unaware of any specific details, but limiting the number of jobs in administration has been one of the postulates raised by the Union of Entrepreneurs and Employers for a long time. The announcement of savings and caution in spending public funds on the functioning of the state sets a good course of action.

The Prime Minister also announced the introduction of the so-called “shield allowance” for people and families with the lowest income in the amount from PLN 400 to 1,150. Its purpose is to compensate for the increase in food prices. However, this is yet another public transfer of a social nature and will constitute a further burden on the state budget. Increasing the system of social benefit, which is already rather extensive, may turn out to be counterproductive and lead to an even higher inflation. We are unequivocally critical of this particular element of the “Anti-Inflation Shield”.

Furthermore, Prime Minister Morawiecki criticised the CO₂ emission allowance trading system and noticed its disastrous impact on energy prices in Europe. In our report “EUA: Price bubbles and the competitiveness of Poland and the European Union” of September 2021², we elaborated in detail on the price bubble on the emission allowance trading market. For this reason, we support the announcement of actions to improve this system.

To sum up, the Union of Entrepreneurs and Employees is in favour of most of the proposals envisioned in the “Anti-Inflation Shield”. The announced tax cuts may slow down price increases and they are the right response to one of the greatest inflation crises in years.

***

 

See more: 25.11.2021 Commentary of the Union of Entrepreneurs and Employers on the announcement of the “Anti-Inflation Shield”

Warsaw, 26^th November 2021

Commentary of the Union of Entrepreneurs and Employers on the European minimum wage

Position of the European Parliament on the directive on adequate minimum wages in the European Union.

On 11^th November 2021, the European Parliament’s Committee on Employment and Social Affairs (EMPL) adopted the Parliament’s position regarding the European Commission’s proposal for a directive on adequate minimum wages in the European Union. The position provides for making part of the proposals contained in the draft directive stricter.

The first proposed amendment concerns Article 4 of the draft directive. Under the original proposal, member states with collective bargaining coverage less than 70% of workers should establish a framework of favourable conditions for their conduct, by law after consultation with the social partners or by agreement with social partners, and subsequently establish an action plan to promote collective bargaining. According to EMPL’s adopted position, the required percentage of employees covered by collective bargaining should amount to 80%.

It is also proposed to include thresholds among the rules for determining the minimum wage in an individual member state. These thresholds should come up to 50% of the average gross wage and 60% of the median gross wage in a given country. The draft directive referred to these values only as an example of recognising the minimum wage as “adequate”, whereas the proposed amendment introduces these values directly into Article 5 of the draft directive.

Yet another major amendment is the removal of the entire Article 6 from the draft directive. It provides that member states could, in certain cases, allow different levels of statutory minimum wage for specific groups of workers. This provision would also allow for the possibility to apply specific deductions which could bring workers’ remuneration below the minimum level.

While it is true that the proposed position does not require a plenary vote by the Parliament, the Scandinavians have already announced that they would seek to vote. In Sweden and Denmark, minimum wages are as a rule the subject of agreements between employers and employees. Their culture differs from most European countries in terms of minimum wages, as it is not established by law, and yet, thanks to extensive negotiations, even the lowest wages are quite high.

The opinion of the Union of Entrepreneurs and Employers on the directive on adequate minimum wages in the European Union.

The Union of Entrepreneurs and Employers has expressed its views on the issue of the minimum EU wage on many occasions. We believe the directive might be harmful to both the labour market and the European economy. It can aggravate the situation of the most vulnerable workers, make it harder for the EU to recover from the ongoing crisis, and disrupt well-functioning collective bargaining systems. And above all else, we oppose the introduction of the directive on grounds that the EU lacks the necessary competences to act in the field of wages. The political nature of the European Pillar of Social Rights is non-binding, and the directive is bound to have negative effects both in social and economic terms. Referencing Art. 153 sec. 1(b) of the Treaty on the Functioning of the European Union as the basis for the proposed changes does raise objections too. Indeed, this provision gives the Union the possibility to support member states in activities related to working conditions, however, the same article in sec. 5 expressly states that “the provisions of this Article shall not apply to pay (…)”.

In the opinion of Union of Entrepreneurs and Employers, the amendments to the directive proposed by EMPL constitute further interference of the European Union in matters in which it should not interfere at all. Should we assume that Art. 153 sec. 1(b) provides for interfering with the minimum wage policy in individual member states, these activities should only be of a supportive nature, instead of negating consultation mechanisms efficiently operating in certain countries (particularly in Scandinavia).

The solutions proposed in the directive may also contribute to the inflation crisis in Europe. Increasing wages should go hand in hand with growing GDP and depend on the market, not only on a legal framework imposed by means of a political decision. Some employees may find themselves at a weakened position as a result of these changes, as employers, fearing additional costs, may be reluctant to offer employment contracts, and will only offer part-time jobs.

What we also find worth emphasising in this context is the fact that the directive will not bring about any significant changes in terms of remuneration in Poland. The Polish minimum gross salary amounts currently to PLN 2,800, and it will increase to PLN 3,010 as of January 2022. Meanwhile, the average monthly salary in the enterprise sector, including profit payments, in the third quarter of 2021 amounted to PLN 5,885.75. This means that EU regulations will have little to no impact on the policy regarding the lowest wages in our country. On the other hand, the introduction of the directive will result in further formalisation of the labour market, and will therefore limit the possibilities of shaping the minimum wage policy in the future, especially in a crisis.

See more: 26.11.2021 Commentary of the Union of Entrepreneurs and Employers on the European minimum wage

Warsaw, 3^rd November 2021

Shame on the Ministry of Finance for discriminating against Polish companies

• Only 41% of CIT payers reported tax payable in 2018. Among “flat” PIT payers that share was 83%. Entrepreneurs who pay flat tax also effectively pay three times more income tax (in relation to income) than capital companies.
• The budget is being robbed by means of a commonplace CIT avoidance. The resulting deficit will be an even bigger blow to small Polish companies, because as our report proves, they are the ones where the entire tax burden is shifted.
• The Polish New Deal will only strengthen tax disproportions. Entrepreneurs from the SME sector must prepare for tax increases, while foreign investors (96% of whom operate in the form of capital companies) can count on further tax reliefs.

Earlier this year – in August, the Union of Entrepreneurs and Employers published the report “French companies in Poland” showcasing the enormous scale of tax avoidance among the largest French companies operating on the Polish market. Both the conclusions from this report and the enforcement of the New Deal by the government, containing solutions detrimental to domestic SMEs, prompted us to create a study showcasing tax discrimination of the smallest Polish companies.

“We can’t argue with facts. While Polish entrepreneurs, sometimes described by representatives of public institutions as “schemers”, reliably settle their taxes, capital companies seem to be paying their taxes on a voluntary basis,” claims Jakub Bińkowski, Member of the Board and Director of the Law and Legislation Department at the Union of Entrepreneurs and Employers. “And last time I checked we all used public infrastructure and services.”

The data gathered in the report is alarming. It confirms the fact that that there is a huge disproportion between taxation of SMEs and large enterprises. One of the largest mobile operators paid only PLN 30,000 income tax over a 5-year-long period, and a German discount retailer did not pay a single penny over that period, to name just a few examples of activities responsible for the CIT gap – now at PLN 35 billion.

The state tolerating such a state of affairs and practices is all the more irrational given the amount of public aid that corporations receive. In the years 2016-2020, a German car engine factory received almost a billion zlotys from the state and paid merely half a million zlotys in tax.

“Multinational ownership structures are very often used by large foreign players to lower their CIT,” explains Kamila Sotomska, the Union’s Deputy Director of the Law and Legislation Department. “Claiming that tiny taxes are the result of the scale of investments is completely unconvincing. In sectors such as telecommunications or e-commerce, there are gigantic differences in the effective scale of taxation, even though everyone is investing and spending massive resources on development.”

 

Find out more: 03.11.2021 Report by the Union of Entrepreneurs and Employers “Book of Shame of the Ministry of Finance – tax discrimination against Polish companies”

Warsaw, 21^st October 2021

Opinion of the Chief Expert of the Union of Entrepreneurs and Employers on digital economy
regarding the Personal Information Protection Law

The Personal Information Protection Law (PIPL), the Chinese equivalent of the European General Data Protection Regulation (GDPR), will enter into force at the beginning of November this year. While it resembles the GDPR in many ways, there are also a number of significant differences proving the goals of the Chinese law are broader than mere protection of personal data.

PIPL regulates how personal data is collected and processed by companies. Both GDPR and PIPL similarly define such basic notions as “personal data” or “personal data processing”. Following its enforcement, data processing will only be allowed if it has a clear and legitimate purpose and is limited to the “minimum extent necessary to achieve the purposes of data processing”, and the user will have to consent to their processing. This consent may be withdrawn at any time, and companies will not be entitled to refuse to render services solely on this basis. Contrary to the GDPR, PIPL does not mention any legitimate interests of the administrator, yet it states that data may be collected without consent in certain cases, such as compliance with an obligation imposed by law or to the extent necessary to perform the contract concluded with the user etc.

Both GDPR and PIPL are applied in an extraterritorial fashion, which means both acts apply to the processing of personal data that takes place outside the borders of the EU and China, respectively. However, the scope of the extraterritorial application of PIPL is wider than in the case of GDPR. When determining the territorial scope of the GDPR, it is necessary to take into account the geographic location of the administrator or the processing party, and more specifically, whether it is based in the EU or conducts business activities in the EU. Running a business in the EU can be determined by offering services in one any of the member states. The availability of a website or the use of a language that is also a widely spoken language in a third-party country are not sufficient indicators. On the other hand, enabling an order in the currency of one of the member states may be enough.

Meanwhile, PIPL will apply to the processing of personal data outside of China, provided that the purpose of the processing is to provide products or services to individuals in China or to “analyse” the behaviour of individuals in China. Other objectives can be added by regulation. This shows that PIPL is “casting a much bigger net” than the GDPR.

Due to PIPL, foreign entities will be required to establish a branch or representative office in China for purposes related to data protection and control together with the Chinese authorities. This requirement largely reflects a non-EU entity representative known from GDPR.

The new provisions will also introduce restrictions on the cross-border transfer of personal data. Some provisions resemble those of the GDPR, but PIPL also includes a number of additional requirements, especially if the data exporter is an operator of a critical IT infrastructure or is processing a volume of personal data that requires permission from the Cyberspace Administration of China (CAC).

Firstly, a data controller planning to transfer personal data to entities outside of China is required to:

• obtain separate consent from users;
• take the necessary measures to guarantee that foreign recipients of data can ensure the level of protection required by PIPL;
• carry out an impact assessment on the protection of personal data.

Second, critical infrastructure operators or large data processors will need to store personal data locally. Should a transfer of data abroad become a necessity, the controller will have to undergo a security audit conducted by the CAC. These provisions will give the Chinese regulator wide opportunities to interfere in the business practices of companies and defend Chinese public interests.

Ultimately, the PIPL gives China the opportunity to take countermeasures against countries that have:

• acted in a way that discriminates against China in the protection of personal information;
• violated the interests of Chinese citizens whose data were processed;
• violated China’s national security and public interest.

To sum up, PIPL, following the example of GDPR, sets high standards of personal data protection. On the one hand, one could say that it is testament to the normative power of the EU in international relations and achieves one of the strategic goals of the European Commission to export EU standards. However, if we take consider the fact that PIPL, unlike the GDPR, will increase the control of the central state apparatus over the economy and strengthen China’s international position against foreign entities, we will see that these high standards are used against the EU itself. This is primarily due to the fact that PIPL will cover foreign companies to a much greater extent than GDPR, and will limit cross-border data transfer. Ultimately, PIPL shows how, in an increasingly data-driven economy, the regulation of cyberspace is becoming a new arena for geopolitics.

 

Kamila Sotomska
Chief Expert of the Union of Entrepreneurs and Employers on digital economy

 

See more: 21.10.2021 Opinion of the Chief Expert of the Union of Entrepreneurs and Employers on digital economy regarding the Personal Information Protection Law

Warsaw, 2^nd November 2021

Commentary of the Union of Entrepreneurs and Employers
on the tax reliefs and exemptions planned under the “Polish New Deal”

This October, the Tax Foundation published its latest report on the tax-friendliness in OECD countries. In the 2021 International tax competitiveness Index, Poland was ranked 36^th out of 37 countries[1]. It is not the first time that we came second from the bottom: last year, we achieved a similar result, and we were placed 33^rd two years ago. Only in Italy, there is now a less friendly tax system. Therefore, there is no doubt that the urgent postulate of amendments to the tax law is justified, and one of the most important goals of these amendments ought to be the tax system simplification in order to make it both citizen- and entrepreneur-friendly. After all, it is no secret that the legal framework as well as its stability and transparency are some of the chief factors impacting economic development, the situation of domestic entrepreneurs, and strategic decisions regarding FDIs. For this reason, we decided to follow up on the tax system simplification to take place in Poland.

The “Polish New Deal” is a comprehensive economic programme shaped by the Polish government that has become a headline-grabber in recent months, and one of its main assumptions is to introduce a number of changes to the tax law. Some of the changes proposed will be welcomed with open arms and have been postulated for years, such as the increase in the tax-free amount and the change of its degressive character or the increase in the second PIT threshold. On the other hand, the draft acts contain a whole range of provisions that will be a blow to Polish enterprises and will bring more harm than good, for instance, the changes in the healthcare premium paid by entrepreneurs.

Another issue that we evaluate negatively is the introduction of numerous incomprehensible exemptions to general taxation in the form of tax breaks and reliefs. In our opinion, the rules on taxation of individual entities should be transparent, clear, and structured in such a way as to reconcile the interests of both the State Treasury and the taxpayer. This should be done without the need to create a long list of exemptions, the rules of which are in part incomprehensible, especially for an average citizen who is no expert in the field of tax law. On the official website of the Ministry of Finance, simplification packages for entrepreneurs are announced, and below we can read the full list of breaks and exemptions from the basic principles on which the tax system is supposed to be based. The catalogue thereof (with brief justification) is as follows:

• R&D tax relief supporting conceptual work on a new product.
• Prototype tax relief aiding the transfer of an idea into the language of practice and production.
• Tax relief for innovative employees facilitating competition for specialists with key skills and competences.
• Robotisation tax relief to facilitate the launch of a product-dedicated production line.
• IP Box relief to reduce the burden at the stage of sales.
• IPO tax relief along with investments in stock exchange debutants exemption to make it easier for Polish companies to enter the stock exchange market and find the investors they need.
• Consolidation relief addressed to companies which, by merging with another entity, decide to save, e.g. their contractor, supplier or other business in need of support.
• Expansion relief to enable double deduction of expenses on searching for new markets for Polish products.
• Attractive tax rules for investing through VCs as an incentive to invest capital in innovative Polish enterprises and startup companies.
• Modified and improved Estonian CIT – a modern taxation method that promotes investments and minimises formalities in tax settlement.
• Relief for the return of employees and small business – a tax incentive to return with experience and capital gained abroad.
• Lump sum for new investors – an incentive for entrepreneurs who have achieved success abroad to transfer their business management to Poland.
• Favourable tax conditions for sponsoring activities to facilitate CSR activities of companies as well as celebrities in the worlds of business, culture and sports.
• Capital return program – a proposal for those who have made risky tax decisions in the past and want to do business in Poland with a “clean slate”[2].

In view of the Union of Entrepreneurs and Employers, the proposed changes not only will lead to a greater complexity of tax regulations, but will also be the source of  additional legal risk. Each individual case where a specific tax break will have been applied will be associated with the risk of such a possibility being questioned by tax authorities. It may prove necessary to obtain individual tax interpretations, often resulting in legal disputes lasting many months, generating additional costs for entrepreneurs, but also unnecessary burdens on the tax authorities themselves. Creating incentives for the development of entrepreneurship in the form of a catalogue of tax breaks in the conditions of a dynamically developing economy, important in European terms, makes little sense. Many large entities operating in Poland pay close to no taxes, often as a result of tax optimisation. Small and medium-sized enterprises, however, need stable and clear tax rules much more than a wide range of tax reliefs. Meanwhile, the government proposes to significantly increase the effective public-law burdens by way of changes in the rules on healthcare premiums, on the one hand, while on the other, it creates a complicated system of tax reliefs, which entrepreneurs will most likely not be able to use without professional help of specialists, which translates into additional operating costs.

We are concerned that the changes proposed in the “Polish New Deal” will make the tax system, currently one of the most complex in the world, even less transparent. If the proposed reliefs are to positively affect the development any enterprises, it will be those from the tax advisory services sector. On those from other sectors of the economy, the changes might have the opposite effect.

 

See more: 02.11.2021 Commentary of the Union of Entrepreneurs and Employers on the tax reliefs and exemptions planned under the “Polish New Deal”

***

[1] Tax Foundation, International tax competitiveness Index 2021.

[2] https://www.gov.pl/web/finanse/projekt-przepisow-podatkowych-polskiego-ladu-w-konsultacjach (date of access: 2^nd November 2021)

Warsaw, 26^th October 2021

 

Position of the Union of Entrepreneurs and Employers on the ‘Fit for 55’ package

 

While the Union of Entrepreneurs and Employers does not question the necessity to care of the climate and the natural environment, the measures to be taken to that end should be of a sustainable nature and should therefore also take its socio-economic aspects into account.

In our view, the draft documents and legal acts constituting the ‘Fit for 55’ package presented for consultation are an expression of a purely ideological approach to combating climate change. The instruments and solutions provided for in them fail to guarantee the achievement of set goals. However, a tangible effect of their enforcement may be the impoverishment of European society and a reduction in competitiveness of the EU economy.

In the context of works undertaken to develop a European climate policy, the current state of the European energy system should also be taken into account, which is characterised by high instability and excessive dependence on third-party countries. Unfortunately, in the presented documents, we cannot find the balance between striving for a zero-emission economy and ensuring energy security for the entire EU.

The ‘Fit for 55’ package[1] is a set of interconnected proposals which together aim to ensure the implementation of the ambitious EU climate policy. The amendments proposed in the package cover not only the areas of climate and energy, but also such sectors as fuel, electricity, heavy industry, road transport, real estate, land use and forestry. Their main goal is to reduce greenhouse gas emissions by 55% by 2030, in comparison to levels from 1990, and climate neutrality by 2050.

It is the belief of the Union of Entrepreneurs and Employers that the prepared strategy is excessively optimistic concerning the opportunities that the planned energy transformation may bring, and it disregards the considerable risks that arise due to the implementation of such radical reforms.

One should consider that the implementation of the instruments included in ‘Fit for 55’ (a significant part of which are of a fiscal or para-tax nature) will result in the loss of competitiveness of the European economy and thus a widespread impoverishment of EU citizens.

The introduction of such significant reforms without prior appropriate macroeconomic analyses that would take into account the impact of the ‘Fit for 55’ package on the economy of the entire EU as well as individual member states in the period up to 2030 and beyond can be viewed as slightly lacking vision. The presented documents also overlook the estimated social and economic impact, although it is obvious that the strategy being implemented will bring about significant economic changes for the EU population and enterprises.

The European Emissions Trading System (EU ETS)[2] – a speculative instrument to negatively impact other sectors of the economy

The EU ETS obliges issuers to obtain and redeem allowances to emit carbon dioxide (EU allowances, or EUA). Therefore, emission allowances are necessary for EUA installations to be able to conduct economic activity in their industry. These are, for example, combined heat and power plants that burn emission fuels.

The free pool of allowances that can be used by selected enterprises operating under the EUA system does not cover the entire market demand. For this reason, the system allows for secondary transactions whereby installations with a surplus of allowances can sell them to the party with a shortage, which is unable for various reasons to reduce emissions to the necessary minimum.

The nature of the CO₂ emission trading system allows investors to join the transactions. They form the secondary group of EUA buyers. One should keep in mind that investors do not require an operating licence and thus allowances become one of the many products available on European financial markets. Investors are interested in purchase of instruments solely in order to gain profit (from arbitration, derived from price differences, or speculative on exchange rate differences) or, alternatively, to hedge themselves against unfavourable price changes. Such an emissions trading system leads to the formation of bubbles, increasing EUA prices. This, in turn, leads to the fact that companies emitting greenhouse gases incur increasingly higher costs for obtaining allowances, instead of allocating these funds to activities and investments reducing CO₂ emissions.

Following the above-mentioned reasons, the Union of Entrepreneurs and Employers negatively evaluates the functioning of the ETS system whose actual impact on reducing CO₂ emissions remains limited. Therefore, we are equally critical of the proposed amendments to include maritime economy, road transport and real estate in this system.

CBAM[3] – protectionism may backfire on the EU

The introduction of the Carbon Border Adjustment Mechanism (CBAM) at EU borders will in fact establish an additional customs duty on the import of certain goods. Such a solution will certainly be negatively perceived by the Union’s trading partners, who, in order to “maintain a sense of symmetry”, may decide to introduce retaliatory tariffs. Therefore, in our view, the introduction of a carbon tax would result, among other things, in an increase in domestic production costs due to the increase in the prices of imported semi-finished goods. On the other hand, retaliatory duties imposed by other countries would significantly weaken the position of EU exporters.

Moreover, apart from negative economic effects, CBAM may be of little benefit to the climate. While the European Commission claims CBAM will cut greenhouse gas emissions by 1%, the Cambridge Institute for Sustainability in its recent analysis estimated its impact at merely 0.023%[4].

Conclusions

The Union of Entrepreneurs and Employers in indeed aware of the necessity to act for the climate and the environment. We believe, however, that the European climate policy is ill-designed, as it only sets ambitious goals, and does not provide for effective ways to achieve them. Instruments that are intended to help take care of the environment are as a matter of fact short-sighted in their nature. In short term, they are likely to have a quick albeit non-lasting effect, yet in the long run they will prove devastating for the European economy and therefore for the entire Community.

For this reason, we are in favour prudent and reliable measures to achieve low-carbon emissions in the European Union. We oppose any and all actions that may cause harm to the competitiveness of European enterprises, as well as the widespread impoverishment. Consequently, we ought to ensure that reforms do not generate the risk of increasing poverty in terms of energy and mobility. In our view, the EU should, on the one hand, guarantee appropriate support mechanisms and a fair transformation of the fossil-fuel mining and energy sectors, and, on the other hand, should not limit investment opportunities, for example with the use of transition fuels, which significantly help to maintain the energy security of individual member states.

The current climate policy is to a large extent a set of penalties, restrictions and taxes. More emphasis ought to be placed on positive measures that will encourage CO₂ emitters to invest and modernise. Deregulatory and entrepreneurial initiatives are what is needed to help Europe return to the global economic elite.

There can be no doubt that the EU could take more effective pro-ecological actions, while at the same time having a greater impact on shaping climate policies in third-party countries.

Find out more: 26.10.2021 Position of the Union of Entrepreneurs and Employers on the ‘Fit for 55’ package

***

[1] Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions ‘Fit for 55’: delivering the EU’s 2030 Climate Target on the way to climate neutrality (COM (2021) 550 final).

[2] Directive of the European Parliament and of the Council amending Directive 2003/87/EC establishing a system for greenhouse gas emission allowance trading within the Union, Decision (EU) 2015/1814 concerning the establishment and operation of a market stability reserve for the Union greenhouse gas emission trading scheme and Regulation (EU) 2015/757.

[3] Regulation of the European Parliament and of the Council establishing a carbon border adjustment mechanism.

[4] https://www.cisl.cam.ac.uk/files/cbam_report.pdf

Warsaw, 28^th October 2021

 

Union of Entrepreneurs and Employers with the largest social media reach
among Polish business organisations

 

We are pleased to inform you that, in the period from January to September 2021, the Union of Entrepreneurs and Employers was the most visible entrepreneurs’ organisation in social media according to an independent media monitoring centre. Over these 9 months, the Union managed to generate almost twice the range of publications than its largest competitor. At the same time, Cezary Kaźmierczak, President of the Union, achieved by far the largest reach in social media among Polish business organisation leaders, achieving results almost seven times better than the runner up in the ranking.

Source: Newspoint Monitoring Mediów (combined total reach for Facebook, Twitter and LinkedIn – January-September 2021)

The Union vs the Competition – January-September 2021 (estimated reach):

C. Kaźmierczak (President of the Union vs other Business Leaders – January-September 2021 (estimated reach):

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Positions, memoranda, reports and opinions of our experts on the most important economic issues, as well as up-to-date information on initiatives undertaken by Union are published online on an ongoing basis.

 

About the Union

Established in 2010, the Union of Entrepreneurs and Employers is the fastest growing and most active organisation of entrepreneurs in Poland. Its members include over 52,000 companies, 16 regional and 21 industry organisations. Every year, the Union publishes more than 30 reports, studies, vidos and over 100 legislative commentaries, positions, and opinions. It organises numerous debates and meetings. The goal of the Union of Entrepreneurs and Employers is to change Poland into a country with optimal business conditions and the best tax system in Europe. The Union is an apolitical organisation supporting the free market and common sense, regardless of political divides. The Union is a founding member of the Social Dialogue Council and has an EU representative office in Brussels.

Warsaw, 20^th October 2021

 

While we must defend our borders, we need immigration for settlement, not Gastarbeiter

 

The key conclusion from a new report published by the Union of Entrepreneurs and Employers today: the Polish policy on immigration ought to be based on a quota system and should provide for an easy path to obtain permanent residence and legal employment.

Experts of the Union of Entrepreneurs and Employers have long drawn attention to the fact that Poland is in need of a reasonable immigration policy, that is it not just a temporary necessity.

“As a result of a low total fertility rate, we are now facing a rather serious demographic problem, which affects the situation on the labour market, whereas in the long run, it will impact almost every aspect of the functioning of the state,” comments Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers. “To maintain our current economic growth, we simply have to accept the fact that we need immigrants.”

As the Union’s experts indicate in their report, problems related to demographics are the root of numerous short- and long-term challenges. The former are mainly related to workforce shortages in several sectors of the economy, while the latter are much more complex and are related, amongst others, to increasing burdens on the Social Insurance Fund or the healthcare system.

Unfortunately, the Polish immigration policy currently solely responds, and not in a fully effective manner, to the former. Its structural weakness is the consistent adherence to a model based on fast-rotating and short-term immigration.

“One could say that the model of immigration policy adopted in Poland is of a Gastarbeiter character,” continues Cezary Kaźmierczak. “Immigrants come for a short time, work hard and are then forced to go back to their country of origin. They have no serious connection to Poland. A couple of Western European countries had made that mistake, and we are, unfortunately, not learning from it.”

The system described above fails to meet the needs of employers and employees alike. The former group is looking for employees for a longer period, as they want to ensure the stability and continuity of their business operations. The other, in turn, often declares the willingness to leave their country for good, ergo they need a state with predictable and foreigner-friendly settlement procedures.

“Despite the fact that professional activity of immigrants in Poland remains one of the highest in the European Union, our adopted model of immigration is not up to date with society’s needs,” claims Jakub Bińkowski, Member of the Board of the Union and Head of the Law and Legislation Department. “Immigration is a value the state should not underestimate. Meanwhile, existing regulations are definitely in favour of fast-rotating immigration, which – while it does temporarily fill the gaps in labour supply – is not the answer to our development challenges in the long run.”

In their report, the Union’s experts indicated desired changes for the better in public policy. Above all else, the system should give preference to settlement and family immigration, enabling the acquisition of citizenship in the long term. A white and red card, highlighting Poland’s national colour, should serve as a physical confirmation of obtaining a long-term residence permit as well as legal employment. It should be issued for a period of 3 years at first and later, under certain conditions, should be extended indefinitely. To maintain control over the immigration process, the government should make a political decision regarding the number of immigrants from each country that the state will be able to accept over a given period.

“It goes without saying that we need immigrants,” concludes Cezary Kaźmierczak. “However, we must draw a line between legal and illegal immigration. We have a firm position on the latter – we have to make use of the experience of others and put to use a wide range of instruments: from physical barriers in the form of walls, through deportations of illegal immigrants to their country of origin, to a lifetime ban on re-entry to the Republic of Poland.”

 

Find out more: 20.10.2021 Report by the Union of Entrepreneurs and Employers: Poland’s migration policy – necessary directions of changes