Warsaw, 28th January 2020

 

JUST TRANSITION FUND – POLISH PERSPECTIVE

 

The Polish energy sector is to a significant degree dependent on coal. Approx. 78% of all domestically produced electricity comes from this raw material – at the same time, the average share of solid fuels in the energy mix in the EU amounts to ca. 17%. A gradual reduction of coal-derived electricity and the development of renewable energy sources, required from the point of view of achieving the ambitious climate goals set at the European Union level, will certainly be an enormous infrastructural, economic, and social challenge. The scale of the project is evidenced by the fact that the total cost of Poland’s energy transformation does indeed vary depending on who presents it; however, in any and all scenarios, it reaches several hundred billion euros. The estimates differ depending on their complexity from EUR 140 billion to even EUR 900 billion. Moreover, according to a report by the European Commission, from all the regions in Europe, Silesia will suffer the most negative consequences of this transformation, where up to 40,000 people may lose their jobs.

There is no doubt that Poland’s incurring of the costs indicated above on its very own, even if it were spread over multiple years, basically borders on the impossible. The draft budget act for 2020 assumes that revenues will be equal to expenses, and will amount to PLN 429.5 billion, which is equivalent to approx. EUR 100 billion. In the most comprehensive of the options presented in the course of public debate, enforcing the energy transformation would therefore require devoting all budget revenues to this end for a period of nine years. Given this, the possibilities for financial participation of the European Union in a gigantic economic transformation project seem to be particularly interesting.

The Just Transition Fund, a key element of the mechanism that is to launch, according to the assumptions, EUR 100 billion of investments may become one of the financing tools for this transformation. In connection with the lively discussion over recent weeks about the gravity of the Fund and its benefits for Poland, several remarks should be made.

First of all, whatever funds were to be transferred to Poland from the Just Transition Fund, they will not be sufficient to cover all costs of Poland’s energy transformation. The “fresh” money in the Fund is to be EUR 7.5 billion, constituting the basis to mobilise a total of EUR 100 billion within seven years under public and private investment. Even if the mechanism worked with 100% efficiency and if all the money from it went to Poland only, it would still not allow for a complete financing of our country’s energy transformation.

Secondly, owing to the fact that the Fund is to be credited with only EUR 7.5 billion, doubts have been raised on numerous occasions regarding the possibility of generating with these funds the expected capital expenditure. It should be noted, however, that a similar mechanism proved successful (in terms of efficiency of generating investments) in the case of the Juncker Plan, under which it was possible to mobilise by December 2019 almost EUR 460 billion in investments from the initial EUR 21 billion, by co-financing projects by member states, private investment or instruments of the EIB. Furthermore, Poland was one of the main beneficiaries of the plan in terms of euro invested per GDP. This experience suggests that although there is relatively little “fresh money” in the fund, it may serve as leverage to stimulate capital expenditure higher many times over.

And thirdly, the EUR 2 billion that are to be transferred from the Fund’s budget to Poland are simultaneously a lot and a little. A lot, because all signs point to the fact that Poland will be the country to receive the largest amount of funds. A little, because – as Małgorzata Jarosińska-Jedynak, the Minister of Development Funds and Regional Policy, rightly pointed out – this is still a drop in the vast ocean of needs. And contrary to initial reports, the funds are to reach not only regions strongly dependent on coal, but also those in which peat is extracted or oil from shale is exploited.

To sum up, the Just Transition Fund might be an interesting tool to support Poland’s energy transformation, but it certainly will not be the primary source of its financing. Poland will still have to make use of other sources of support from the EU and mobilise considerable resources of its own.

The Act of 21^st November 2019 amending the Act on Excise Tax – signed on 27^th December 2019, entered into force on 1^st January 2020

 

Politician responsible for the Act: Tadeusz Kościński

Ministry: Finance

Description of Act: The draft act changes the rate of excise duty on selected products. Cigarettes and various forms pf alcohol will be subject to a rate of excise duty 10% higher than before

Minuses:

–  A very short vacatio legis. The industry was not prepared for such a high excise duty increase;

–  Violation of the legal certainty principle. The increase announced was much smaller than the one introduced (by 3%);

–  Increased risk of a grey area in industries where it had successfully been reduced in recent years due to, among others, no major tax changes.

 

Visit our portal Plusy Ujemne (Negative Pluses).

 

Fot. 4924546/ pixabay.com

Warsaw, 3^rd January 2020

 

Commentary of the Union of Entrepreneurs and Employers
on new regulations regarding the transport of persons

 

The regulations establishing the legal framework for the functioning of intermediaries in the transport of persons are theoretically in force since 1^st January 2020. Only theoretically, as there are still no executive provisions of key importance from the point of view of their implementation. We are extremely perplexed that having enforced a very reasonable reform which is the result of months of work and dialogue between the Ministry of Infrastructure and the social side, the legislator was unable to prepare relevant regulations in a timely manner. The consequent of said delay is an unacceptable lack of legal certainty – both for platforms and drivers as well as passengers.

The Act of 16^th May 2019 amending the Act on road transport and some other acts significantly changed the operating conditions for a large number of entities on the passenger transport market. The wording of the regulations would change at individual stages of the two-year-long period of works, but the final approach was a very reasonable compromise: the level of restrictiveness of regulations regarding the taxi market was reduced (e.g. by eliminating municipal topography exams), the provisions were adapted to the requirements of modern times (e.g. introducing the possibility of settling fares using a mobile application, and not necessarily a taximeter) and regulated the activity of platforms providing brokering services for the transport of persons, for instance, by obliging them to obtain a separate licence or brokering services only for entrepreneurs licenced for the transport of persons.

Many technical issues, such as the model brokering licence for transport of persons, as well as standards and requirements for cash registers in the form of software or a mobile application used to settle fares for passenger transport, were not regulated directly in the Act. These were delegated and to be introduced in the form of individual ministerial regulations. While the result of the legislative process regarding the amendment to the Act on road transport can be assessed positively, the legislator has failed the exam in terms of issuing executive acts. For example, the regulation of the Minister of Infrastructure amending the ordinance on the technical conditions of vehicles and the scope of their necessary equipment, eliminating the requirement to equip taxis with taximeters, was announced on 31^st December 2019, which is exactly one day before the amendment to the Act on road transport entered into force – an act that to a certain extent amended the Traffic Law Act by allowing the possibility to use a mobile application in taxis instead of a taximeter. The regulation of the Minister of Infrastructure on the model permit for the profession of road transport operator and the model licence for the performance of road transport and extracts from these documents, containing the model licence for the provision of brokering services for passengers, was not announced until 10^th December 2019. In this case, however, the problem is less worrying, because according to the Act of 16^th May 2019, intermediaries have three months to obtain the appropriate licence.

The real problem, however, concerns the regulations that ought to have been issued by the Minister of Finance and the Minister of Digital Affairs, i.e. dedicated to cash registers in the form of software and a mobile application for settling the passenger transport fee. These provisions have not yet been announced at all, and are of key importance for the proper functioning of entities operating in the field of passenger brokerage. There is no doubt that one of the most important changes introduced as part of the amendment to the Act on road transport was the change enabling settlement of fares using the mobile application.

One of the objectives of the amendment was to reorganise the Polish passenger transport market. Unfortunately, the effect of the lack of relevant regulations is quite the opposite; the present situation generates chaos and a huge sense of uncertainty as to the legal situation of entrepreneurs operating on this market. The Union of Entrepreneurs and Employers has consistently supported legislative changes aimed at modernising regulations regarding market of transport of persons in Poland. We believe that the act resulting from months of work is a good act that fulfils its role. It would be terrible if those efforts were to be wasted by sheer sluggishness in preparing the relevant executive provisions. Therefore, we urge the Minister of Digital Affairs and the Minister of Finance to publish the relevant regulations as soon as possible.

 

Fot. MichaelGaida/pixabay.com

Warsaw, 27^th November 2019

 

Union of Entrepreneurs and Employers presents 5 challenges for
Poland and the new government

 

Public services are currently the biggest challenges for Poland. Healthcare, education, energy transformation, environmental protection and infrastructure – these are the areas which, according to the Union of Entrepreneurs and Employers, are key from the point of view of further development of Poland. The organisation’s experts prepared a 250-page-long report discussing each of them separately.

There can be no doubt that, after the last four years, one could say Poles are much more well off than before. Economic indicators speak for themselves: salaries have increased along with the GDP, and the standard of living of many people has improved significantly. It seems that having achieved this short-term goal, the time has now come to face much more serious challenges. In addition to regulatory changes in the legal environment for business operations, the judicial system and other areas critical for the economy, a number of state policies must be addressed, often associated with public services, the quality of which still leaves much to be desired, and to which we must make significant adjustments to advance as a civilisation.

“The choice of these areas is quite obvious. Besides, Law and Justice had once defined them at one of the Congresses in Katowice,” states Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers. “Healthcare is in a permanent crisis, and it might get even worse, because we are getting older. Environmental protection is a topic that is very high on the list of EU policy priorities, yet we still do not have a coherent approach to this issue. The energy transformation that we have to accomplish over the next decades is also directly related to it. In the face of changing geopolitical parameters, large infrastructure investments are becoming of key importance. And to finish with, we need a well-educated society to implement all our ambitious plans.”

The report published today is in fact a package of five documents that are the result of many months of hard work of the Union’s experts and consultations with selected external specialists. Each part of the publication contains a diagnosis of the current state of affairs and key recommendations for the future together with a justification. According to the Union’s experts, their implementation may influence the developmental pace of Poland. The thematic scope of the report is, of course, very wide and covers issues from waste management, through the structure of the healthcare market, to the manner educational institutions are managed.

“In all of the analysed areas, we can distinguish some special challenges that we will have to face over the next few years,” notes Jakub Bińkowski, the Union’s director of the Department of Law and Legislation. “We are talking about demographic problems affecting the situation in the healthcare system or the transformation of the economy into a knowledge-based model, forcing changes in the education system or, finally, the implementation of EU environmental and energy policies. All these issues are real phenomena that we will have to face.”

According to the experts of the Union of Entrepreneurs and Employers, the time for the implementation of subsequent social programs has already ended, and the priority for the coming years should be to begin facing the long-term key challenges ahead of Poland.

“One can thinks of this report as a set of strategic assumptions for the state in areas that we believe are an absolutely priority,” concludes Cezary Kaźmierczak. “We worked on it for a long time and consulted with industry experts, because we did not want this report to be considered a collection of our wishful thinking. All the recommendations it contains are realistic and possible to implement.”

Download the report: 27.11.2019 Report by the Union of Entrepreneurs and Employers: 5 challenges for Poland

Warsaw, 25^th November 2019

 

Union of Entrepreneurs and Employers publishes a report on
environmental protection

 

On 25^th November 2019, the Union of Entrepreneurs and Employers published a report on issues related to environmental protection. The material was created as part of the Union’s Energy and Environment Forum inaugurated last week.

In the publication, experts of the Union of Entrepreneurs and Employers presented diagnoses and recommendations regarding four basic categories of issues related to environmental protection: climate and air, waste management, permits and environmental fees, and water.

“We do not operate in a vacuum. Environmental issues are being given an increasingly higher priority at both the European and national levels, so they naturally also become the subject of our closer interest,” says Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers. “The report on environmental protection is the first document that was created within the Energy and Environment Forum and presents horizontally our key recommendations in this area.”

In the part dedicated to climate and air quality, a division was made into three areas: industrial and energy, domestic and municipal, as well as transport. A separate set of recommendations was assigned to each area. The Union’s experts pointed to the necessity of, among others, use of available financial instruments that can support the transformation of the Polish energy sector, increase the effectiveness of the “Clean Air” program, while expanding its scope and implementing sound transport regulations, aimed more at supporting the development of low-emission vehicles available to the widest consumer groups or sharing economy than at implementing further restrictions for entrepreneurs and citizens.

“The general idea behind most of the recommendations the report contains is the broadest possible use by the legislator of the “carrot” instead of the “stick” in the broadly understood environmental policy,” emphasises Marcin Nowacki, Vice-President of the Union. “An increasing care and concern for the environment are already a civilisational process, but we must not forget about the economy and the people’s standard of living. Environmental regulations should not impact these areas negatively.”

Waste management is another important subject area covered in the report. This is an important issue since the deadline for transposing the waste directive package will expire soon and, only a year later, Poland will have to implement the directive’s provisions on limiting the impact of certain plastics on the environment.

“Enforcing these provisions is a big challenge for Poland,” claims Jakub Bińkowski, the Union’s director of the Law and Legislation Department. “We must remember that they contain not only hard goals, e.g. in the scope of materials’ recovery, which we need to achieve, but also indicate actions that we should undertake to achieve those goals. Therefore, even the implementation of an appropriate mechanism of extended producer responsibility will be crucial for the effective functioning of the entire system.”

In terms of environmental permits and fees, the Union’s experts primarily highlight the need to simplify and standardise the system, while in the part on water management they stress the need to invest in retention reservoirs and to pursue an active policy making the public and entrepreneurs aware of the principles of reasonable water management.

“We do not want environmental issues to be debated only by representatives of two extremes,” summarises Cezary Kaźmierczak. “We hope to be a balanced voice backed by common sense, attracting attention to areas where some state activity is necessary, and at the same time emphasising that all types of activities should take into account the possibilities and potential of entrepreneurs, as well as the impact of the proposed regulations on the daily lives of the Polish people.”

Download the report: 25.11.2019 Report by the Union of Entrepreneurs and Employers: Environmental protection

 

Fot. photoshopper24 / pixabay.com

Warsaw, 7^th November 2019

 

WEI and Americans for Tax Reform discuss the digital tax at a round table in the ‘Freedom Lounge’

 

On 6^th November 2019, a round table dedicated to the subject of the digital tax and the possible consequences of this concept entering into force in Poland took place in the ‘Freedom Lounge’. The event was organised by Warsaw Enterprise Institute, a think tank of the Union of Entrepreneurs and Employers, and Americans for Tax Reform, a Washington-based organisation fighting for taxpayers’ rights for over 30 years.

The event began with a presentation by Andreas Hellmann who at ATR deals with international tax law, including tax on digital services. After introducing the organisation he represents in a nutshell, he briefly described the history of the digital tax idea.

“By means of proposals to introduce a digital tax, France, the Czech Republic and Poland are trying to bypass international rules of tax jurisdiction,” he said. “Every politician’s dream is to tax people who have no influence on him being elected.”

The ATR representative then presented the current situation regarding the popularity of the idea of digital tax and negatively assessed the concept itself, indicating that this tribute ultimately burdens consumers.

“This tribute would impose an enormous financial burden for companies providing digital services (a large part of them American), which would in turn lead to higher prices for consumers in European countries,” he emphasised. “The digital tax is a huge threat to competition and innovation as well as American and European economic growth.”

After Andreas Hellmann’s speech, Jakub Bińkowski, director of the Department of Law and Legislation of the Union of Entrepreneurs and Employers, took the floor and presented the latest document by the Union: the Business Paper under the title “Digital tax and the threats resulting from its introduction”. He stressed the fact that the development of digital tools should not lead to attempts to create sectoral tax solutions.

“If international corporations are taxed inefficiently, it is necessary to consider systemic changes instead of drafting regulations only for selected industries,” he stated. “Especially since according to available studies, representatives of ‘traditional’ business often pay relatively lower income taxes than entities from the digital industry. So why should the latter be charged with any additional tribute?”

Both presentations highlighted the fact that international organisations such as the European Union and OECD have worked or are working on developing solutions for taxing the digital economy. Independent initiatives of individual countries in this scope do not serve solving the problem on a global scale, and are troublesome from the point of view of companies due to the chaos they generate.

Tomasz Wróblewski, Warsaw Enterprise Institute President, spoke after the presentations and opened the round table expert discussion. He said that at the moment it was difficult to isolate a digital economy, because digital tools and the Internet were becoming more and more commonplace tools used to run a business.

“Designing solutions exclusively for the ‘digital economy’ is a step in the wrong direction, as it is difficult to define this industry and the OECD admits it. There can no doubt that the digital tax is simply another idea aimed at obtaining even more money from citizens in the form of taxes,” he noted. “The French example perfectly shows that the group most burdened by this tribute after its introduction are the consumers, and indirectly its costs are also borne by smaller companies using digital solutions.”

Experts invited to participate in the round table, representatives of business and ministries, then discussed the concept of a digital tax, international experiences and the potential effects of introducing this tribute in Poland.

 

Download the report: 07.11.2019 Report by the Union of Entrepreneurs and Employers: Digital tax and the threats resulting from its introduction

 

 

Fot. geralt/pixabay.com

Warsaw, 19^th November 2019

 

Union of Entrepreneurs and Employers inaugurates the activities of the Energy and Environment Forum

 

On 19^th November 2019, during a dedicated press conference, the Union of Entrepreneurs and Employers inaugurated the Energy and Environment Forum. The Forum is intended to serve as a platform for business representatives, experts and other stakeholders to work on developing and implementing solutions for the broadly understood energy and environmental policies of the state.

“It goes without saying that issues related to energy and the environment will be some of the most important priorities of the new European Commission,” stated Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers. “Also after the formation of the new Polish government, one can realise that these subject will be quite high on the agenda. Therefore, we have come to the conclusion that representatives of business should participate actively in the process of developing solutions both at the strategic level, in relation to Poland’s energy transformation, as well as at the level of implementation of individual solutions adopted by the European Union institutions.”

The Union of Entrepreneurs and Employers has been keeping a very close eye on environmental issues for many years. In 2016, the Circular Economy Forum began operations, a special platform that managed to develop initial assumptions for the implementation model regarding the principles of extended producer responsibility as part of transposing the waste directive package.

“Many economic entities are not aware of the large changes ahead of them resulting from the introduction into the Polish legal order of solutions provided for in the ‘waste package’ or the directive on limiting the impact of certain plastic products on the environment,” highlighted Marcin Nowacki, the Union’s VP. “And this is why we want the new Forum’s role to encompass both conducting substantive work on the implementation of regulations as well as increasing awareness of business circles regarding the challenges that await us.”

The Forum’s work is to be divided into several sections, covering climate, air, waste and the circular economy as well as water. These sections correspond with the objectives of the Forum, which include participation in the development of the Polish energy transformation plan, participation in consultations on the implementation of the waste directive package, or development of recommendations in the field of state policies to improve air quality.

“A considerable amount of work within the Forum will certainly be devoted to issues of legislative nature, because all strategic projects are ultimately implemented by means of the adoption of legal acts,” said Jakub Bińkowski, director of the Union’s Department of Law and Legislation. “However, we aspire to be active also at earlier stages, among others, during conceptual work.”

After the presentation of the general objectives of the Forum by the representatives of the Union, the invited experts: Krzysztof Bolesta, Paweł Waligórski and Karol Wójcik, took the floor. Each of them presented key problems and priorities in their area of expertise: air quality policies, medical waste and waste management issues, respectively.

 

More information about the Energy and Environment Forum.

Warsaw, 18^th November 2019

 

Tender for a documentary series about the beginnings of Polish capitalism

 

The documentary series will consist of six episodes telling the story of a whole decade of Polish entrepreneurship after the fall of communism.

By portraying individual profiles of the participants of those events, we want to show the Polish people’s path to prosperity. We are creating these series with young and foreign viewers in mind who only know the history of the beginnings of Polish capitalism from family stories or media coverage.

The documentary’s purpose is to present the realities in which the pioneers of Polish business began their careers. How Polish capitalism developed and gained experience, shaped mostly by young people who created 6 million jobs without offices or computers, with no telephones or cars, without a banking system or infrastructure to back them up. Immersed in legal chaos, with rampant corruption, unchecked inflation and lack of professional support from lawyers, financial advisors, marketing experts, not to mention the inexistence of a developed loans and credits system.

In particular, we want to introduce to larger audiences the people who started from scratch, without any experience, initial wealth, post-regime affinities or support from the remnants of the communist secret services. How family businesses rose to power in times of chaos. We plan to dedicate one episode, or alternatively several mentions, to the so-called ‘postkomuna’ (post-communist elites) in order to showcase their advantages, the importance of systems, alliances and access to money. How years later they look against the background of the entire market.

It is our ambition to distribute the film abroad in the future, therefore the idea for a narrative itself will be essential. It must not be a boring story about a dozen people – just people talking. We want each episode to have its own emotional narrative that will allow the viewers to feel the tension and risk that former bazaar vendors, traders, smugglers, first publishers of press, books, builders, transport companies, shopkeepers etc. had to face.

Furthermore, the series ought to make use of archival footage.

We ask all interested parties to submit their ideas for the docuseries script until 6^th January 2020 to the following e-mail address: k.niemyjska@zpp.net.pl.

***
The series treatment description must not exceed one A4 page (2000 thousand characters). The budget for the entire project amounts to PLN 750 thousand. The process of selection of the winning project will take place in two stages: the being the selection of submitted proposals, the latter – interview.

The final selection of the script and winning authors of the documentary series will be carries out by Board members of ZPP and WEI – the Union of Entrepreneurs and Employers and Warsaw Enterprise Institute, respectively.

 

Fot. stokpic / pixabay.com

Warsaw, 25^th September 2019

 

POSITION OF THE UNION OF ENTREPRENEURS AND EMPLOYERS ON THE
DRAFT STATE BUDGET FOR 2020

 

The draft budget act for the year 2020 is definitely a historical project. For the first time after 1989, the government proposed a balanced budget, i.e. one in which the sum of revenues is equal to the sum of expenses. The lack of a planned budget deficit is an unprecedented phenomenon that should be assessed definitely positively. Thus far, a deficit amounting to tens of billions of zlotys was an almost certain element of every subsequent state budget. It is admirable, therefore, that with such extensive social policy, the government managed to balance revenues and expenses. This is also important because in the last few years, which were a period of excellent economic situation, subsequent budgets were characterised by relatively small, albeit still deficits.

At the same time, other European countries, such as Germany, were generating budget surpluses. We clearly assess the break up with this kind of “tradition” of having a budget deficit positively, and consider it a great step in the right direction in the general discussion on national financial management. By respecting the rule of expenditure and preparing a budget without a deficit, the government sent a clear signal, also crucial from the point of view of subsequent teams in power, that we should spend as much as we “earn” from taxes and other sources, or at least minimise the deficit. At the same time, at least a few sources of budget revenues that have helped formulate a balanced budget remain dubious. Some aspects of it may be of concern to entrepreneurs.

The planned abolishment of the so-called 30-fold limit has to be assessed negatively. Until now, an employee who generated an income higher than 30 times the forecasted national average remuneration over the course of a year, after reaching this ‘ceiling’, stopped paying social security contributions. This construction has two reasons. First of all, we can assume that people who earn relatively well will be more likely to save their own funds for retirement on their very own. Among other things, the 3^rd retirement pillar in the form of Individual Retirement Accounts or Individual Retirement Security Accounts serves as a tool to realise this potential. The current 30-fold limit allows one to generate a certain amount of funds that can be allocated to private retirement savings. Secondly, this limit is a security measure for the Social Insurance Fund, and indirectly also for the state budget. Under the system which is currently in force, the amount of pension depends on the amount of contributions paid over the years of professional activity to the system and the life expectancy forecasted by the Central Statistical Office. Thus, theoretically, the more someone has paid into the system, the higher their pension should be.

In the case of people earning relatively high sums, such a system, without the 30-fold limit, would be burdened with the risk of having to pay very high pensions in the future. This would be dangerous not only due to the financial condition of the Social Insurance Fund (especially taking into account the current financial forecasts of the Fund), but also the state budget, because in the case in which the funds accumulated in the Social Insurance Fund are not sufficient for the current payment of pensions, the Fund is ‘fed’ by the state budget. Therefore, despite the fact that it is a separate organisational unit, its financial condition has a direct impact on the state of the state itself. Therefore, we assess the abolishment of the 30-fold limit, as we have done it many times in the past, definitely negatively. Potential revenues from the abolition of the limit are estimated at approximately PLN 5 billion. It seems that entrepreneurs would gladly accept a correction of the announcement of a budget without a deficit considering the withdrawal from this idea which is clearly harmful to Poland.

The accumulation of social programs also seems to be dangerous. While the 500+ program significantly reduced the problem of extreme poverty among families with children in Poland, at the moment we are dealing with a multitude of different types of benefits, some of which were included in the draft budget (extension of 500+ to every first child, the “Good start” program which is a sort of a package for school children and adolescents, medication program 75+), some were adopted this year (13^th retirement), and others have just been announced (13^th and 14^th retirement as annual benefits for pensioners). In the current, still good economic situation, the successful implementation of these announcements is not endangered. The danger, however, exists that when the national economy stops growing at an expected pace, the state will be willing to reach deeper into the pockets of taxpayers, counting on primarily entrepreneurs and middle class representatives to finance their proposals. One of these manifestations may be the abolition of the 30-fold limit, which had already been discussed, however, in the context of the proposals contained in the Long-Term Financial Plan, it also seems dangerous to extend the obligation to pay social security contributions for other purposes. Such an increase in labour costs, combined with an increasingly intense wage pressure (especially in the context of an abrupt announcement of a minimum wage increase), must translate into an increase in the prices of products and services, and, consequently, lower competitiveness of Polish companies.

It is not at all possible not to notice that the budget includes a significant reduction in the tax wedge consisting of several elements, i.e. exemptions from PIT for employees up to 26 years of age, a reduction in the basic PIT rate to 17%, as well as an increase in tax deductible costs. This is obviously the desired direction. The Union of Entrepreneurs and Employers has consistently supported every initiative aimed at reducing all taxes and levies resulting in a payroll burden.

It is difficult to predict how realistic the macroeconomic assumptions used by project’s authors to develop a budget remain. The almost 10% revenue increase from VAT, stable revenues from income taxes and excise duties – there is no doubt that these issues were estimated assuming that the Polish economy will not be affected by a significant slowdown. It is impossible to say now whether such optimism was justified. One must, however, take into account the fact that so far the deteriorating sentiment in the German economy has not had a greater impact on the dynamics of Polish growth.

There is no doubt that the first balanced budget after 1989 is a very good piece of information. It is difficult to accept this success be depreciated by emphasising e.g. the one-off nature of some of the funds. Of course – some of them, such as the transformation fee from Open Pension Funds or proceeds from the sale of CO₂ emission permits do not take place on a regular basis. However, we are dealing with such cases very often, from various titles, and so far this has not resulted in creating a budget in which the sum of expenses would be balanced by the sum of revenues. At the same time, criticism should be taken into account, as it would be reasonable to develop a long-term strategy for balancing state finances, taking into consideration many risks – both of temporary and strategic nature – and finding ways to neutralise them. A budget without a deficit (or with a minimal deficit) should not be an exception in the long, multiannual history of state debt, but should become a new target, a kind of a standard that any government should strive for every year.

 

Download the position: Position of the Union of Entrepreneurs and Employers on the draft state budget for 2020

Warsaw, 22^nd October 2019

 

The Union of Entrepreneurs and Employers warns: abolishing the 30-fold limit is a terrible solution, there are other ways to find budget revenues

 

During today’s press conference, the Union of Entrepreneurs and Employers assessed the idea of abolishing the 30-fold limit on Social Insurance Institution contributions unequivocally negatively. The Union’s experts also gave examples of alternative actions ensuring the fulfilment of the assumption of finding an additional PLN 5 billion in budget revenues.

In the National Long-Term Financial Plan, the intention to abolish the 30-fold limit on Social Insurance Institution contributions is explicitly stated. According to current regulations, no social security contributions need to be deducted from income earned during the course of a year that exceeds 30 times the average remuneration. An attempt to adopt draft amendments in this regard took place in 2017, however, it was challenged by the Constitutional Tribunal for procedural reasons.

The current limit makes sense in a very obvious way. The point is that the state will not have to pay enormous pensions in the future. The legislator assumes that if someone earns relatively well, they are able to set aside funds for retirement on their own. Lack of such a limit would translate into an enormous burden on the Social Insurance Fund in the future, and one should also remember about the difficult demographic situation in Poland.

In accordance with the assumptions presented in the Long-Term Financial Plan, the government plans to obtain an additional PLN 5 billion in 2020 due to the abolition of the contribution limit.

“I think that this goal is impossible to achieve,” states Cezary Kaźmierczak, president of the Union of Entrepreneurs and Employers. “People are sensible. The abolition of the contribution limit means a radical increase in the burden on higher wages. This means that the employment contract will definitely become the least profitable form of employment and those who earn better will instantly switch to self-employment”.

The impact of lifting the 30-fold limit on salaries is particularly important in the context of the competitiveness of the Polish labour market. Already now, the IT industry is short of even tens of thousands of employees. Young people graduate in Poland and then look for employment abroad where they can count on the best financial conditions, including in terms of their remuneration. By abolishing the 30-fold limit, we would make the Polish market automatically less attractive not only to graduates of Polish universities, but also to talent from around the world.

“This is the root problem with the abolition of the limit,” emphasises Jakub Bińkowski, director of the Union’s Department of Law and Legislation. “We have been talking a lot about innovations, the fourth industrial revolution and start-ups, but way too often we forget what lies behind these great words: really highly qualified specialists who can make the Polish economy a truly competitive one. By abolishing the limit, we would reduce their real remuneration, and these are highly mobile people, so with their competences they can successfully look for a job anywhere in the world”.

The Union of Entrepreneurs and Employers is able to provided several examples of solutions that would serve to find an additional PLN 5 billion in the state budget. According to the Union’s experts, each and every one of them would be more beneficial to the Polish economy than lifting the 30-fold limit.

“The first and best solution would be to cut expenses,” stresses Cezary Kaźmierczak. “5 billion zloty in terms of the whole budget is not a staggering amount of money, so we would be able to achieve this goal by making precise savings. Another way out is to adopt a budget with a deficit – we praised the government for a balanced budget, but those few billion in minus would still be the best result in the history of the Third Polish Republic. The third is to look for income somewhere else, specifically in consumption, because taxes on labour are the worst ones”.

Representatives of the Union of Entrepreneurs and Employers appealed to the government to discuss the negative consequences of the potential abolition of the contribution limit and alternative possibilities to save several billion zlotys in the state budget.

 

22.10.2019 Statement of the Union of Entrepreneurs and Employers on the planned abolition of the 30-fold limit on Social Insurance Institution contributions