Warsaw, 23^rd December2020

 

The Union of Entrepreneurs and Employers demands the economy to be unlocked

 

The Union of Entrepreneurs and Employers is critical of the introduction of the next stage of shutting down the economy. The Union calls for actions aimed at the unlocking of all closed sectors, the implementation of educational activities aimed at citizens and entrepreneurs, as well as the enforcement of the sanitary regime in the DDM standard and epidemic guidelines for all industries.

We have observed that the solutions to be introduced [by means of the Regulation of the Council of Ministers on the establishment of certain restrictions, orders and bans in connection with the epidemic, draft act of 21^st December 2020 (RD275)] constitute the next stage of a creeping lockdown of the economy.

The fourth quarter of the epidemic has begun. There is no indication that the number of new cases as well as the burden on the healthcare system will be reduced on a weekly basis as a result of vaccination. We must adapt our actions to the situation in which the coronavirus will be a significant phenomenon from the point of view of state management in the months to come. Unfortunately, the answer to this problem must not be to close subsequent sectors of the economy with relative passivity in the remaining scope. The lockdown of the economy must not be the main instrument in the fight against the coronavirus. We must not at this point refer to the practices of the so-called West, where the capital generated over the past decades is and will be the “safety cushion” for developed economies. We must have the courage to face the facts. After a year of empirical experience on a global scale, there is no clear evidence that lockdowns are an effective instrument to fight the epidemic. They usually impact the state of affairs, but that impact is not a decisive factor. Essential in this case are the following: models of social interaction and behaviour, compliance with sanitary standards (distance, disinfection, mask), a society’s demographic structure, and cohesive communication from those responsible for crisis management.

The Union of Entrepreneurs and Employers draws attention to the inconsistency of government actions in the field of communication, transparency, and predictability of decisions. While we have full understanding of the dynamically changing epidemic situation and preventive actions, we are extremely critical of the inconsistency of the decisions made with planned decisions presented earlier. The government announced on 4^th November 2020 that when the average of seven days of illness exceeded 27,000 new cases on a national scale, a national quarantine would be implemented, including restrictions on movement. There is also a graphic showing clearly the thresholds of the safety regulations. We assessed positively the presented “road map”, recognising that it generated the basic predictability of decisions to be taken. However, a few weeks later, the so-called national quarantine was in fact introduced, while the level of cases over that last 7 days prior to the announcement suggested rather lifting the restrictions in line with the previously communicated strategy. We are concerned that the inconsistency between decisions taken and those communicated may diminish the government’s credibility in terms of anti-epidemic activities. This is particularly important in the period when one of the key short-term policy goals should be, amongst other, to persuade as many people as possible to get vaccinated.

Regardless of the above, we negatively evaluate the introduction of lockdowns in subsequent industries. The closure of shopping malls, swimming pools, aquaparks, gyms, clubs and fitness centres, entertainment and recreational activities or ski slopes will have a measurable impact on the economic and social situation of thousands of Poles, and consequently the economic recession in the coming quarters. Furthermore, the total lockdown of hotels will not only affect this industry itself, but also hamper operations of all industries that require business travel – the production sector in particular. While we understand the concerns related to a possible third wave of the epidemic, as well as those regarding the reports of new mutations of the virus, we consistently point to the lack of proper, evidence-based justifications for introducing restrictions in other industries. Therefore, it is difficult to understand both the sectoral scope of the proposed restrictions and their details (for example, the key to selecting the types of shops that can be open in shopping centres remains a mystery; or the shutdown of “retail islands” in shopping centres located in open spaces such as passageways). The procedure for announcing the latest regulation also deserves criticism – although it appeared in advance, it was not decided to subject its content to consultation with representative organisations.

We would like to draw your attention once again to the critical situation in the food catering industry, which was significantly affected by the lockdown in the spring. Currently, it has been closed for months, with no prospects of a change in their situation. The government also has not presented any future aid plan not only for this industry, but also for other closed ones after the lifting of the restrictions. We consistently call for the introduction of a uniform VAT rate of 5% for the entire food catering industry and for the introduction of similar discounts for other sectors whose operations are now limited. Such solutions would be a real help at the stage of unlocking the economy and would constitute a beneficial solution that the government could introduce for businesses after the epidemic.

At the same time, the Union of Entrepreneurs and Employers once again calls for the introduction of solutions in the field of e-commerce to compensate for the lack or limitation of sales in traditional channels. This would enable consumers to purchase certain products without having to physically go to stores, which is of considerable importance taking into account the epidemic. In this context, it would be reasonable, for example, to allow remote sales of those categories of goods which at the moment cannot legally be sold this way. In particular, it concerns low-percentage alcohol (wine, beer, ciders), prescription drugs or tobacco products, as well as novelty and electronic cigarettes. These solutions seem to be justified in the context of the introduced restrictions in movement, as well as the goal of limiting the mobility of citizens, assumed by the government. So far, however, only restrictive solutions have been set to achieve this goal.

To sum up, in our appeals to date, the Union of Entrepreneurs and Employers has emphasised the lack of predictability in the actions undertaken by the legislators and regulatory uncertainty. They are particularly pronounced during the ongoing crisis, and the actions announced in recent days are a clear example of this. This will result in limiting the risk of making business decisions (including investments). A 12-month-long moratorium on any new burdens for workers and entrepreneurs is necessary. We also call for a direction to be determined in terms of comprehensive law simplification and deregulation. These and other necessary actions were presented by the Union of Entrepreneurs and Employers in the Union’s postulate as part of the planned social pact on 17^th November 2020.

The introduction of further restrictions will be less and less effective. The law must not be on a collision course with economic practices, reality, and society’s expectations. Such a strategy of fighting the epidemic already causes growing resistance amongst citizens and entrepreneurs. Presently, Poles are learning anew, just like under the socialist regime, how to circumvent laws that are too rigorous and do not correspond to reality.

 

See: 23.12.2020 The Union of Entrepreneurs and Employers demands the economy to be unlocked

 

Fot. Corona Borealis / Adobe Stock

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

Warsaw, 16^th December 2020

 

Pursuit of technology sovereignty or new protectionism? Discussion on the new direction of European policy-making with particular emphasis on the Digital Services Act

 

On Tuesday, 15^th December 2020, the European Commission’s legislative proposal on the Digital Services Act (hereinafter referred to as “DSA”) was published. Public consultations conducted by the European Commission concerning the shape of future regulations, in which the Union of Entrepreneurs and Employers took part, ended on 9^th September. Moreover, the European Enterprise Alliance and SME Connect also presented their opinions in this respect.

The event devoted to discussing the technological sovereignty of Europe and DSA was attended by Marianna Sidoroff, Deputy Director of the Digital Economy Department at the Ministry of Development, Labour and Technology, who delivered a keynote speech, and Fredrik Erixon, Director of the European Centre for International Political Economy, who presented the report entitled “Europe’s Quest for Technology Sovereignty”. Furthermore, the panel discussion was attended by Horst Heitz, Chair of the Steering Committee at SME Connect, Tomasz Snażyk, President of the Startup Poland Foundation, and Michał Kanownik, President of the Management Board of the Association of Importers and Producers of Electrical and Electronic Equipment – ZIPSEE “Digital Poland”.

The Digital Services Act aims to regulate the provision of digital services and to create a level playing field for EU companies. Nonetheless, the new EU regulation also has specific consequences for SMEs, especially those in Central and Eastern Europe.

“In our contribution to the consultations, we called for respect for the fundamental principles of the digital single market, such as the home state regulation, known as the country of origin principle. Entrepreneurs need a clear and concise regulatory framework that will not undermine technological development. This applies in particular to companies from the SME sector, whose development is supported by digital platforms,” says Marcin Nowacki, Vice President of the Union of Entrepreneurs and Employers.

It is essential to respect the country of origin principle. In line with its ideals, companies may provide digital services in other member states under the laws of their home country, that is, their country of origin. This rule is especially important for enterprises from the SME sector and from the Central and Eastern European region, as it mitigates the fear of applying foreign law in the event of litigation.

“The COVID-19 pandemic has accelerated the digital transformation of our society at an unprecedented pace. The digital infrastructure has turned out to be fundamental for our society,” says Marianna Sidoroff, Deputy Director of the Electronic Economy Department at the Ministry of Development, Labour and Technology, and adds: “The concept of technology sovereignty combines economic strategy with values. We strive to protect the fundamental values of the European Union, while allowing the development of companies in the single market.”

Recently, we have witnessed legislative progress in the field of online content supervision in several member states. Unfortunately, this has also led to discrepancies between national and sometimes even regional and local regulations. Such legal fragmentation hinders the free movement of services and, as a result, the functioning of the single market. Effective regulation in this regard should minimise fragmentation at the national level as well as take into account existing legislation when identifying needs in the context of a sectoral or horizontal approach.

Moreover, the introduction of the ex ante regulation seems very problematic. Internet platforms play a particularly important role in the development of companies from the SME sector. Thanks to them, small and medium-sized companies gained the opportunity to enter the market, expand and develop their operations beyond domestic markets, which had previously been impossible. These facts show that the introduction of a demanding ex ante regulation may have a negative impact on companies from the SME sector, and as a result, might reduce the assortment and offer available to consumers. Therefore, the Union of Entrepreneurs and Employers believes that the proposed regulations should be based on the currently enforced and legally binding regulations, such as the P2B Regulation.

 

Fot. François Genon / Unspalsh.com

Warsaw, 30^th November 2020

 

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

 

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

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

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

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

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

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

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

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

 

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

 

Fot. stevepb / pixabay.com

Warsaw, 11^th December 2020

 

Protectionism within the European Union and how to counteract it?

 

On 11^th December 2020, the Union of Entrepreneurs and Employers organised a debate titled “Protectionism within the European Union and how to fight it?” with the participation of Aleksandra Frelek-Dębecka, Director of the European Affairs Department at the Ministry of Development, Labour and Technology, Agnieszka Dawidonis-Twardo, from the European Law Department at the Ministry of Development, Labour and Technology, Andrzej Gantner, Director General of the Polish Federation of Food Producers, Marcin Nowacki, Vice-President of the Union of Entrepreneurs and Employers, and Kamila Sotomska, Analyst at the Law and Legislation Department of the Union of Entrepreneurs and Employers. The debate was moderated by Jakub Bińkowski, Director of the Law and Legislation Department of the Union of Entrepreneurs and Employers.

The single market is one of the European Union’s greatest achievements to date. Nonetheless, protectionism remains a major problem affecting most entrepreneurs and hampering the development of the single market. Eliminating existing barriers could attract an additional EUR 17 billion in investment annually and generate a further 1.3 million jobs, which are key to restoring the competitiveness of the European economy after the pandemic. In a new report, the Union of Entrepreneurs and Employers looks at the problem of protectionism comprehensively and analyses it from a historical, economic, legal, practical and political perspective. During the debate, the panellists presented a number of ways in which to fight protectionism.

“Research conducted with the participation of over 1,150 entrepreneurs from Poland, the Czech Republic and Slovakia showed that almost 40% of the companies surveyed encountered protectionist practices within the European Union, either in person or through their business partners,” said Marcin Nowacki, Vice-President of the Union of Entrepreneurs and Employers.

Independently conducted studies by the Union of Entrepreneurs and Employers and the European Commission show that administrative practices (e.g. the requirement to submit additional certificates) are the protectionist measures used most frequently. While most can be tackled with a wide range of bans established under EU law, the current legal framework does not appear sufficient to deal with all the problems of the single market.

“Among the most common protectionist practices, Polish exporters name: the use of official food control of a given country to depreciate consumer confidence, sanitary controls with increased frequency in relation to products from Poland, the need for long-term storage of documents, requirements for additional certificates or transport documents, short validity dates of permits or mandatory placement of specific text or markings on packaging. There are also frequent impositions of quality requirements that do not result from EU regulations. An example of such an action is the use of unclear criteria when evaluating products, e.g. a Czech criterion might be described as of insufficient quality,” added Andrzej Gantner, Director General of the Polish Federation of Food Producers.

„EU law offers a wide range of tools to combat protectionist practices by prohibiting the use of import and export duties or charges having equivalent effect, discriminatory taxation on products from other member states, quantitative restrictions and measures having an effect equivalent to quantitative restrictions on imports and exports. Nevertheless, the legal framework in force seems insufficient to address all the problems of the common market for several reasons,” noted Kamila Sotomska, Analyst at the Law and Legislation Department of the Union of Entrepreneurs and Employers.

“The problem of protectionism within the single market is urgent and the crisis caused by the pandemic has only made it worse. There is a growing awareness of the problem among politicians, officials, and entrepreneurs as recognition of the benefits of the single market is growing too and there is still much to be done. Information from the entrepreneurs themselves is very important – and we constantly appeal for feedback! – it provides us with knowledge and arguments, and then we can explain and try to solve these problems – directly with the European Commission and / or bilaterally with other member states. We encourage you to submit applications to the following address: sekretariatDSE@mrpit.gov.pl or to contact the SOLVIT Polska Centre, which acts as an intermediary in solving specific problems such as disputes with the public administration of another member state on issues regulated by EU regulations (https://www.gov.pl/web/rozwoj-praca-technologia/solvit),” emphasised Aleksandra Frelek-Dębecka, Director of the European Affairs Department at the Ministry of Development, Labour and Technology.

 

See: 11.12.2020 Report by the Union of Entrepreneurs and Employers: Protectionism within the European Union and how to counteract it?

 

fot. Giampaolo Squarcina / ma lic. Flickr.com

Warsaw, 11^th December 2020

 

Opinion of the Chief Healthcare Expert of the Union of Entrepreneurs and Employers on the National Vaccination Programme

 

The fight against the epidemic is entering its decisive phase.

On 8^th December 2020 at 7:00 am GMT, the first person in Europe was vaccinated against the effects of the disease caused by SARS-CoV-2. At the same time, a document was published in Poland called the National Vaccination Programme against COVID-19.

It is beyond dispute that the scale of the planned vaccination programme exceeds any previous preventive measures undertaken within the Polish healthcare system.

The more so it is to be appreciated that such a document has been drawn up reliably referring to all the necessary areas that require clarification in this situation.

A team of experts and advisers made a considerable effort to describe the context and assumptions of the entire programme. Assuming that vaccination coverage in Poland should amount to at least 50% of the adult population, i.e. more than 15 million people, it is crucial that the logistics is handled in a way that is not only safest for patients and staff, but – above all else – operationally efficient.

The medical service providers industry calls for special attention to be given to practical solutions that can improve the effectiveness of the programme:

1. Separate from stationary contracting of home vaccinations, which means creating specialised units. The specific nature of home visits requires the organisation of a visiting doctor-and-nurse team, equipped with infrastructure for transporting the vaccine at specific temperatures, and above all, logistical planning;
2. Allowing nurses to mass vaccinate people against COVID-19 without having completed a specialist course on preventive vaccinations, performing their activities under the supervision of a physician;
3. The active promotion of the proposed system of vaccination-incentives related to the creation of an Individual Epidemic Passport, which would also include information on test results, should be a key tool supported by means of social campaigns and resuming access to specific services.

The implementation of the above-mentioned postulates should effectively improve the work of physicians within Primary Healthcare (Podstawowa Opieka Zdrowotna) and ensure an adequate personal infrastructure in the event of medical personnel shortages.

Agnieszka Szpara
Chief Healthcare Expert of the Union of Entrepreneurs and Employers

 

See: 11.12.2020 Opinion of the Chief Healthcare Expert of the Union of Entrepreneurs and Employers on the National Vaccination Programme

 

Fot. TheDigitalArtist / pixabay.com

Warsaw, 10^th November 2020

 

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

 

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

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

Assumptions of a general nature for our proposal:

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

REGULATIONS AND PROPOSALS TO BE POSTPONED

• Sugar tax

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

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

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

• Corporate income tax on limited partnerships

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

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

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

• Retail sales tax

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

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

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

• Taxation of all civil law contracts

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

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

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

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

• Other regulations imposed on entrepreneurs, including industrial entities

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

REGULATIONS TO BE IMPROVED

• Act on the profession of pharmacist

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

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

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

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

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

• Extension of the lump sum on registered income

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

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

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

• Economic restrictions related to counteracting COVID-19

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

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

REGULATIONS TO BE IMPLEMENTED

• Reimbursement development mode

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

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

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

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

• Sunday trade ban to be lifted

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

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

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

• Expansion of online sales

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

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

• Reduction of the VAT rate for food catering services

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

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

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

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

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

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

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

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

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

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

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

• Exceptional solutions ensuring the continuity of operations of strategic sectors

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

• Heightened flexibility of labour law provisions

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

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

 

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

 

Fot. successphoto / Adobe Stock

Warsaw, 8^th September 2020

 

Union of Entrepreneurs and Employers took part in the consultations of the European Commission regarding the Digital Services Act

 

The Union of Entrepreneurs and Employers took part in public consultations initiated by the European Commission regarding the Digital Services Act package that is being developed.

The new regulation on digital services commonly known as the Digital Services Act is a planned legislative initiative of the European Commission. Its main goal is to adapt European regulations to the evolving realities of the digital economy, including the revision of the e-commerce directive.

Until 8^th September this year, the European Commission conducted public consultations to gather the views of businesses, organisations, and consumers from across Europe. The presented data will help create new high-quality regulations that will enable, among other thing, the effective regulation of platforms in the EU. The in-depth survey covered the following areas: user safety (including illegal products, content, and services), platform transparency, harmful content, intermediaries’ liability, the role of platforms serving as the so-called gatekeepers; but also general issues relating to the management of digital services in the single market.

 

See: The Union of Entrepreneurs and Employer’s contribution to the European Commission Consultation on the Digital Services Act

 

Fot. Guillaume Périgois / Unsplash.com

Warsaw, 9^th November 2020

 

Introducing CIT on limited partnerships may curb investment and employment

 

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

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

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

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

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

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

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

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

 

***

About the survey:

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

 

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

 

Fot. stevepb / Pixabay.com

Warsaw, 19^th November 2020

 

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

 

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

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

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

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

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

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

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

 

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

 

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

 

Fot. HomeschoolingMinimalist / Pixabay.com