Warsaw, 19^th December 2018

 

Back to the Polish Social Insurance Institution

 

“A spectre is haunting Europe. A spectre of a bankrupt state-owned, pay-as-you-go pension system that has reigned for almost an entire century” is how José Piñera begins his book on social insurance.

Already a long time ago, in 2002, the Polish government admitted that de facto that there are no such things as “insurance” or “premiums” – there is tax on our remuneration. That is why they were able to introduce a work ban for pensioners: to increase the number of jobs for graduates. As I wrote back then, it’s as if PZU (the Polish national insurance provider) stated that they would only compensate the entrepreneur for destroyed property, provided that he would hire several unemployed people. However, heretics, who do not believe in the divine power of the government, stress that the amount of work on the market is not a constant. Instead of looking after a “just” division of work, the government should stop interfering with the creation of new jobs. As one could already then read in a study by the OECD Department of Economics: “introducing higher taxes on work apparently led to a reduction in both labour demand and supply, especially in the countries of Continental Europe, where the increase in taxes for social security increased average labour costs”.

If the so-called “social insurance” were real insurance, then the next governments could not have come up with the idea of unilaterally shifting the maturity date of benefits – as governments do with retirement age manipulation or changes in the algorithm based on which the benefits are calculated (what they actually do with retirement).

In March 2006, the then Prime Minister appointed me as the Chairman of the Supervisory Board of ZUS – the Polish Social Insurance Institution, and I began to raise amongst the insured awareness what their “insurance” really was. My mission ended thus quickly, after merely a dozen or so months. Now, I will continue it as a member of a representative organisation of employers: ZPP – the Union of Entrepreneurs and Employers.

It wasn’t easy, because despite being recommended, which until recently translated into an automatic entry into the body, I had to have a long conversation with the Council for companies whose shareholder is the State Treasury and state legal persons established on the basis of the Act of 16^th December 2016 on the management of state property. I reckon I did a pretty decent job, as since the Prime Minister appointed me to the Board.

Allow me to inform you first who else is a member of the Supervisory Board of the Polish Social Insurance Institution, because I dare suspect that you do not know. Currently, the Board consists of 11 people and these are:

• members appointed at the request of the minister for social security in consultation with the minister for public finances:
  • Justyna Adamczyk,
  • Marcin Zieleniecki,
• members appointed at the request of representative organisations of employers:
  • Iwona Sroka (Pracodawcy RP – Employers of Poland),
  • Grzegorz Baczewski (Konfederacja Lewiatan – Polish Confederation Lewiatan),
  • Robert Gwiazdowski (Związek Przedsiębiorców i Pracodawców – Union of Entrepreneurs and Employers),
  • Jan Klimek (Związek Rzemiosła Polskiego – Polish Handicraft Association),
  • Wojciech Nagel (Związek Pracodawców BCC – Business Centre Club),
• members appointed at the request of representative trade unions:
  • Bogdan Grzybowski (OPZZ – All-Poland Alliance of Trade Unions),
  • Bogdan Kubiak (NSZZ „Solidarność” – Independent and Self-Governing Trade Union “Solidarność”),
  • Józef Ryl (Forum Związków Zawodowych – Trade Unions Forum),
• member appointed at the request of the Polish organisation of retirees and pensioners:
  • Elżbieta Ostrowska (Polski Związek Emerytów, Rencistów i Inwalidów – Polish Association of Retirees, Pensioners and Invalids).

Marcin Zieleniecki is currently the Chairman of the Board, while Grzegorz Baczewski and Bogdan Kubiak are Vice-Chairmen.

What can the Board do? Nothing has changed since I was Chairman. This means that the Board can “talk” and as part of this talking, the Council may:

• provide its opinion on the request of the minister for social security to the Prime Minister for the appointment of the President of the Polish Social Insurance Institution (ZUS),
• periodically evaluate the work of the Management Board,
• provides its opinion on the intention of the ZUS President to appoint and dismiss the ZUS chief inspector,
• provides its opinion on the draft annual financial plan of the Social Insurance Fund and on the reports on implementation of this plan,
• provides its opinion on the project of the annual financial plan of the Demographic Reserve Fund and on the reports on implementation of this plan,
• provides opinions on the draft annual financial plan of the Bridge Pension Fund and on the reports on implementation of this plan,
• provides its opinion on rules and regulations of the competition which selects the co-financed by ZUS activities of the payers with regard to accident prevention,
• provides its opinion on the draft statute of ZUS,
• provides its opinion on draft legal acts in the field of social insurance and submits initiatives in this field addressed to the minister for social security,
• approves the ZUS annual financial plan and the reports on its implementation,
• approves the annual reports on activities of ZUS.

Of course, absolutely nothing arises from the potential “non-approval” of something by the Supervisory Board or from a “no-opinion” on a matter discussed, or even from a negative opinion.

The powers of those constituting the Board include:

• appointment and dismissal of members of the ZUS Management Board – but not independently, only at the request of the ZUS President appointed by the Prime Minister, regardless of the opinion of the Council,
• determining the remuneration for members of the ZUS Management Board, excluding the ZUS President – his remuneration is determined by the supervisory body – currently the Minister of Labour,
• adopting the regulations of operations of the ZUS Management Board.

So please do not hold any grudges against me concerning all other matters.

Aha! For performing this function – and holding this state “sinecure” – I am entitled as a member of the ZUS Supervisory Board to remuneration in the amount specified in the Prime Minister’s regulation of 28^th December 1998 on the procedure for submitting candidates for members of the Supervisory Board of the Polish Social Insurance Institution, the regulations of the Supervisory Board and the rules for remunerating its members. It amounts to 150% of the allowance specified in the regulations on allowances and other payments for business trips. I swear I’ve no idea how much that is. Probably a thousand zloty. When the money’s transferred, I will let you know the exact amount.

 

Robert Gwiazdowski

 

Fot. Petroniusz/fotopolska.eu

Warsaw, 17^th December 2018

 

Position of the Union of Entrepreneurs and Employers on the draft act on amending the act on tax on goods and services as well as the act–tax ordinance of 8^th November 2018

 

The Union of Entrepreneurs and Employers has repeatedly emphasised the need for a radical change of the VAT rate matrix. From many expert analyses, including those carried out by the Union itself, as well as from scientific research, it is clear that VAT is one of the most complicated taxes, one causing entrepreneurs the most problems. Testament to it is, among other things, the fact that the National Tax Information is most often asked about the tax on goods and services; from almost 1.5 million replies to taxpayers’ phone inquiries, over 575 thousand concerned VAT. Similarly, more than half of individual tax law interpretations issued in 2017 concerned VAT (13,800 out of over 25,000). The level of complexity of this levy is a result of numerous factors, it is impossible, however, not to notice that one of the main problems regarding VAT – especially from the point of view of entrepreneurs – is the multitude of rates and the hitherto design of its rate matrix.

The VAT rate matrix is currently based on the Polish Classification of Goods and Services (Polska Klasyfikacja Wyrobów i Usług), which in fact assigns very specific types of goods to individual rates, the goods being divided according to certain criteria that difficult to justify. Theoretically, the legislator sought to ensure that healthy, less processed food was covered by a lower tax rate than processed food. Taxation of bread is also based on a similar premise, therefore depending on its shelf-life, for example, tax on toasting bread is higher than that on sourdough bread. Unfortunately, the legislator was not consistent in his intention and, for instance, taxed mustard-based sauces higher than pure mustard. If we add to this examples quite bizarre in their nature, such as preferential taxation of waffles and wafers with a water content exceeding 10% of their mass (8% rate), unlike the other waffles and wafers (regular rate of 23%), the VAT rate system appears to us as illogical, complicated and overly fragmented.

Therefore, the actions of the draft’s authors aimed at far-reaching simplification of this tax should be evaluated as positively as possible. When the first news snippets were broadcast and published in the media concerning the intention to significantly modify the VAT matrix, it seemed that the change would not be of a revolutionary character – the Ministry of Finance simply announced the application of a different statistical classification. However, it is evident in the final draft of the act and the annexes to it that the basic objective, i.e. a radical simplification of the system, has largely been achieved. Thence, it ought to be recognised that this draft act is a step in the right direction, and it should be assessed positively.

The VAT rate matrix proposed by the draft’s authors is much simpler than the one currently in force. This is due to the fact that the individual rates cover a group of goods that is as broad as possible, without fragmenting them and assigning them to specific products, as is the case at the moment. For example, in the current legal status, the rate of 8% covers the following: chili, sweet pepper, mace, cardamom, anise, marjoram, curry, thyme, saffron – almost all are separately mentioned (!), whereas, for instance, for nutmeg, the appropriate rate is 5%. Due to the complexity of the matrix in relation to the spices themselves, in practice, doubts would arise whether individual spices should be taxed at the same rate as mixtures of spices. Spices in the current matrix were also distinguished due to the degree of being processed (for example: raw and dried). Bearing in mind that the discussed problems concern only one and quite a prosaic category of products, it is not surprising that VAT is considered to be the most complicated and problematic levy in the Polish system, and the focus here is still only on rates. In the proposed draft act, specifically the annex to the act on tax on goods and services, all the spices were assigned to the 8% tax rate. There is no doubt that both from the point of view of the practical application of tax law and common sense analysis, this solution is much better than the present state of affairs.

An analogous operation to the one mentioned above was carried out in relation to virtually all categories of goods. This way, the system was significantly simplified and in this context, the actions undertaken by the Ministry of Finance should definitely be praised and supported. The matrix is much simpler and more transparent. At the same time, the authors of the draft emphasise that the changes were not to be fiscal in nature, i.e. they were not intended to increase the budget revenues. One can believe in this statement – the grouping of goods, which until now were simply enumerated to specific rates, into broader categories, is inevitably related to lowering or increasing the tax rate for some of them. It can be argued that a radical simplification of the matrix, and such was proposed by the legislator, is impossible without certain changes in terms of the rates applicable to certain goods. Thus, it should be acknowledged that the discussion about the new matrix should be focused on systemic issues and its simplicity. It is understandable that public attention is focused primarily on the above-mentioned individual rate changes. It seems, however, that in the scale of the average consumer’s shopping basket, these changes basically offset each other, and in any case the difference between the present tax burden and the projected one is of no significance.

As part of the significant changes being introduced by the amendment of the Act, a novelty in the form of binding rate information (wiążąca informacja stawkowa – WIS) is noteworthy. According to the provisions, WIS is to be a decision issued by the director of the tax administration chamber, containing the classification of goods or services and the appropriate applicable VAT rate. WIS is to have a protective value, which means that if the goods correspond to the description contained therein, the tax authority will not be able to question the tax rate applied by the taxpayer based on it. Theoretically, therefore, WIS will be a special kind of tax interpretation, however, due to the fact that the groups of goods assigned to the rates are as wide as possible, its protective impact may be stronger than in the case of interpretations applied presently regarding rates. It is worth noting that WIS will concern not only the matter of the tax amount, but also, for example, the application of the reverse charge mechanism.

However positively do we evaluate the presented VAT matrix design, it should be noted that, in principle, the right approach would be in our opinion the adoption of a uniform tax rate. This way, all interpretative problems with regard to rates would be eliminated (which – and that is beyond any doubt – even despite the far-fetched simplicity of the proposed solution) will still exist, and the legal and tax environment for entrepreneurs would be significantly simplified. The basic argument against this solution, which is raised in the public debate, is the allegedly devastating effect of the uniform VAT rate on household budgets, especially of the least wealthy households. It seems, however, that this is a statement with no confirmation in reality.

According to the CenEA report published in 2015[1], household expenditure broken down into VAT rates corresponding to expenditure that was different for households classified as the poorest and for wealthy households. In the poorest households, the share of expenditures on goods and services exempt from VAT was lower (6% against 8.9% for the wealthiest households), as well as the share of expenses related to the VAT rate of 23% (47.8% against 58.7% of the wealthiest households). The explanation of this phenomenon is a larger share in the budget of poorer households of expenditure on basic goods, such as food, which are often subject to a VAT rate of 5%. On the other hand, wealthy households more often make use of services exempt from VAT, such as medical or educational services.

     

Another structure of VAT taxation of the so-called “basket” of goods purchased by poor and affluent households requires an answer to the question of what is the “average” VAT rate paid by households. On the basis of the data already quoted, the “average” VAT rate for the poorest households can be set at 14.7%, and for the most affluent at the level of 15.7%. The results confirm, therefore, that the current system of VAT rates means that the expenses of the poorest households are on average less subject to VAT, but this difference is not significant. This weakens the argument that reduced VAT rates are an important support factor for poor households.

In addition to the analysis of the average VAT rate, it should also be examined how much of a burden this tax is for the household budget. To this end, households were divided in terms of affluence into 10 groups, creating a decile distribution. According to the available data[2], VAT expenditure amounts to just over 16% of the income of the poorest households (first decile), then this value for 8 consecutive deciles is in the range of 9-10.5%, whereas for the last decile (the most affluent households) it comes down to approximately 7%.

Taking into consideration the presented distribution and earlier analyses concerning the average VAT paid, it can be assumed that just about 10% of all households would be affected by the introduction of a uniform VAT rate most severely.

In the discussion on the possible introduction of a uniform VAT rate, it can be noted that the proposed levels of the single rate are quite convergent and most often in the range of 15.5-17%. For example, in January 2015, the chief economist of the Ministry of Finance, Ludwik Kotecki, stated that a uniform VAT rate could theoretically be considered at the level of 16-17%[3]. At the same time, Sławomir Horbaczewski said that a rate within the limits of 15,5-16%[4] would be neutral from the point of view of budget revenues. One can also think of a number of journalistic and political statements, which also suggest varying VAT rates from the indicated range. Taking into account the previously presented data and the fact that the EU requires a rate of at least 15%, such an amount should be accepted as an alternative to the current system.

The introduction of a uniform VAT rate at the contractual level of 15-16% would therefore have, cæteris paribus, a slight impact on household budgets.

To sum up, the presented draft act should be assessed positively as one that is significantly simplifying the system, while recommending the adoption of a uniform VAT rate as the optimal solution.

 

Union of Entrepreneurs and Employers

 

[1] http://www.cenea.org.pl/images/stories/pdf/commentaries/raport1_vat_2.pdf

[2] http://www.cenea.org.pl/images/stories/pdf/commentaries/raport1_vat_2.pdf

[3] https://finanse.wp.pl/vat-16-proc-jednolita-stawka-najlepsza-6114855497205889a

[4] https://www.rp.pl/Opinie/303069902-Jednolita-stawka-pomoze-uzdrowic-VAT.html

 

10^th December 2018

Polish President Andrzej Duda appointed ZPP members to the Social Dialogue Council

On 10^th December 2018, the President of the Republic of Poland, Andrzej Duda, appointed representatives of the Union of Entrepreneurs and Employers to the Social Dialogue Council. This is the culmination of several years of efforts, aiming primarily at obtaining the status of a representative organisation, which was already achieved in March this year, and then enforcing the right to have representatives appointed to the Council provided for by law.

We are glad that small and medium enterprises will finally be represented in this body. The participation of representatives of the Union of Entrepreneurs and Employers (ZPP) in the Council will constitute natural continuation of the activities of many years that we have been executing, focusing our efforts on the struggle to improve the conditions for running a business in Poland, simplifying the tax system and streamlining the judiciary. We believe that through active participation in the dialogue conducted within the Council, the Union will be able to realise its statutory goals even more effectively.

Warsaw, 5^th December 2018

 

The grey economy of tobacco products is in decline, but still too large – further changes necessary

The grey economy of cigarettes in Poland has decreased by almost 30%, but it is still more than the average in the European Union. It is necessary to take further steps in the fight against this phenomenon – according to the latest report of the Union of Entrepreneurs and Employers “Grey market for tobacco products. Diagnosis, proposals for solutions”.

Regardless of the definition of the informal economy, there is no doubt that this is a harmful phenomenon, and those sectors are particularly vulnerable and exposed to it where the “bonus” for illegal activity is the highest. One of them is the tobacco sector. As a result of unreasonable excise tax increases and the lack of adequate legislative activity, the share of the grey economy in the consumption of cigarettes in Poland, according to the consulting firm KPMG, reached almost 17% in 2015. This would mean that almost one in five cigarettes smoked in our country came from an illegal source.

“The situation back then was dramatic,” claims Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers. “We saw the effects of further excise tax increases, and we warned that the problem would only deepen. It seems that the collapse in 2014 sobered many people up and they came to the conclusion that it was probably not the best idea to increase this tax so rapidly and drastically, since the budget didn’t profit from that, and the illegal market was expanding.”

Apart from the unreasonable tax policy, there were no specific legislative actions. Dried tobacco, for example, were taxed, but there was no wider, systemic approach to fighting the grey zone. The focus was on solving problems in an ad hoc manner that were especially evident in a given period. It was not until 2015 that a broader campaign to fight the informal economy of tobacco products was launched. A register of intermediary tobacco entities was introduced, an obligation to deposit excise security was imposed on these entities, and an obligation to keep records of dried tobacco was introduced. Then, in 2017, the “tobacco package” was implemented. It provided comprehensive tools to supervise and monitor the market for growing, producing and selling tobacco.

One didn’t have to wait long for the results – the share of the grey zone in the cigarette market in Poland amounted to 12.1% according to KPMG experts. It is almost 30% less than in 2015, but at the same time almost 30% more than the average for the European Union. This means that there is still much to do in the fight against grey economy.

“The main area to be improved are the regulations included in the penal fiscal code and detailed criminal provisions relating to the illegal circulation of excise goods,” says Katarzyna Włodarczyk-Niemyjska, Director of the Law and Legislation Department at the Union of Entrepreneurs and Employers. “Presently, the provisions are inadequate to the specificity of prohibited acts related to this trade, and sanctions are insufficiently related to the losses for the state budget. We postulate on the pages of our report to change this state of affairs.”

As it is emphasised in the document, the need for further actions aimed at fighting the informal market of tobacco products in becoming rather urgent, because at least two significant risk factors appear on the horizon: the ban on sales of menthol cigarettes entering into force in 2020, as well as the potentially too high increase in the minimum level of excise duty on tobacco products required by the tobacco directive. Both these changes, the former being certain and the latter so far only plausible, can significantly affect the growth of the grey economy of tobacco products in Poland, and this would result in measurable losses both on the side of legally operating entities and the State Treasury.

 

Report of the Union of Entrepreneurs and Employers: “Grey market for tobacco products. Diagnosis, proposals for solutions”

 

 

Fot. Mizianitka/pixabay.com

3^rd December 2018

Poles divided on the trade ban, but for two free Sundays a month for all employees

As much as 71% Poles assume that the state should not determine how citizens spend theirs Sundays, and the ban on trade is perceived as violation of their consumer freedom, according to a survey by Maison & Partners commissioned by the Union of Entrepreneurs and Employers.

What is important, the demand put forward by the Union and the trade sector that instead of sectoral regulations, a statutory guarantee of two free Sunday per month be introduced for each employee in Poland enjoys very large support, of as many as 65% of all respondents. This way, thanks to efficient timetables, buyers would have the opportunity to shop on Sundays, and employees – a day off.

From the presented research, one can also conclude that regardless of their public perception, the provisions regarding trade restrictions on Sundays seem to be completely ineffective. It turns out that before the introduction of the new regulations, 88%of Poles did their shopping on Sunday, whereas now it is 80%, and they complain about high prices and limited range. A loss of merely 10% means that the restrictions cover only a small part of the trade sector.

“Interestingly, among the opponents of trade restrictions on Sundays, a significant group are those who are currently working in this sector,” emphasizes professor Dominika Maison. “44% of them negatively appraise any restrictions whatsoever. However, within the group that has never worked in this industry, the percentage of opponents of restrictions amounts to 37%. Similarly, the restrictions of trade on Sundays is perceived as a hindrance by 51% of employees in this industry and only 36% of those who have never worked in this trade.”

As one can read in the report based on the results of the study, the regulations in force since 2018 limiting trade on Sundays are supported by 43% of respondents, and 42% of respondents oppose them. At the same time, the solution to come into force in 2020, resulting in an almost total ban on Sunday trade, is negatively perceived by as many as 65% of Poles. Interestingly, two groups dominate among these opponents, according to their place of residence. It should not be a surprise that one of them are the inhabitants of large cities, over 500,000 people, out of which exactly one out of two opposes the restrictions of trade on Sundays in any form. However, it turns out that the biggest group of opponents of these restrictions are residents of small towns, up to 20,000 inhabitants.

“In this group, over half of the respondents negatively appraise any restrictions on trade on Sundays,” – notes Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers. “It means that the further this restriction goes, the worse the reception will be in smaller towns. The result may be surprising, but we must remember that in small towns a visit to a shopping centre is quite often the only form of entertainment available at the weekend for the average citizen. If people are forbidden to spend their free time in this way, it is no wonder they refer to these changes negatively.”

 

Survey by Maison & Partners commissioned by the Union of Entrepreneurs and Employers: Attitudes and opinions regarding the restriction of trade on Sundays

 

 

Warsaw, 26^th November 2018

 

Position of the Union of Entrepreneurs and Employers on the digital services tax

 

On 21^st March 2018, the European Commission presented a proposal on taxation of digital economy. The Commission presented both a short-term measure – Digital Services Tax (DST) – and a more comprehensive, long-term proposal. In this letter, we will not refer to the latter proposal of a long-term solution regarding the taxation of international Internet operations.

We would like to focus on the short-term proposal. In the light of the lack of international consensus on taxation of digital activities, the European Commission put forward a proposal providing for the imposition of a temporary special-purpose tax – DST – of 3% on the revenues of enterprises from:

• sales of online advertising space,
• data generated by users,
• digital brokerage services that enable users to interact with each other.

The tax to be paid in Member States, where the users are located, would apply to companies whose annual revenues generated on the international market exceed EUR 750 million and EUR 50 million on the EU market. Although the vast majority of members of the Union of Entrepreneurs and Employers – ZPP are companies from the SME sector that do not achieve the revenues assumed by the EC, we believe that the new tax will affect these enterprises. We are afraid that the tax will be transferred through digital platforms to European citizens and entrepreneurs, which in turn will increase their operating costs, reduce their competitiveness, and their ability to innovate.

The SME sector is responsible for most of Poland’s economic growth. There are over 2 million entrepreneurs employing up to 250 employees. They generate over 60% of GDP and are responsible for over 70% of jobs – almost 3 out of 4 Poles work in such companies. For these enterprises, the Internet is not only a way to attract customers, but also is indispensable for their competitiveness. The main benefits achieved by SMEs on the Internet include, among others:

• reduction of costs of locating and purchasing materials, parts and other necessary resources,
• improved efficiency of production and delivery of goods and services by maintaining lower stocks in warehouses or better cooperation between designers of new products working in different (usually remote) locations,
• lower costs and increased customer service efficiency,
• increased competition in many markets, which necessitates the implementation of ever more modern solutions allowing for further reduction of costs and increase in the efficiency of operations,
• faster and more efficient flow of information within the organisation as well as more efficient communication with external partners,
• enhanced flexibility of work, new methods of work management increasing the efficiency of employees,
• new technical and IT solutions improving work in the organisation and reducing infrastructure investments (e.g. remote teams, working in the cloud etc.).

Pursuant to the above-listed benefits, SMEs can compete with the largest market players as well as offer better and more innovative services and products.

The Union acknowledges that although the new regulation is not directly targeted at SMEs, it will affect their activities. We believe that decision makers should consider the risk that the additional costs resulting from the operation of digital platforms will be transferred to European citizens and entrepreneurs. Such an expected increase in costs from operations conducted on the Internet, which is an increasing part of their functioning, will increase their operating costs. This is confirmed by the OECD’s “Tax Challenges Arising from Digitalisation – Interim Report 2018”, which noted that “an interim measure will increase the cost of capital, reducing the incentive to invest with a resulting negative effect on growth”. It also adds that “a measure only applicable to digitalised sectors risks slowing down investment in innovation for those businesses that are subject to the tax or indirectly affected by it”.

This is particularly important in the absence of an international tax agreement. The unilateral imposition of a digital tax on European enterprises, in the absence of such a tax in other parts of the world, will negatively affect the ability of Polish and European companies to compete with non-EU entrepreneurs (e.g. from the Americas, China or India). As a result, if future revenues are taxable, potential investors, e.g. in a technological startup company, will be willing to lower the proposed valuation and the chances of finding an investor in the company will decrease. We would like to point out that the increase in operating costs applies not only to technology companies, but to every entrepreneur who operates on the Internet. The new tax will increase the costs of marketing, advertising or reaching new customers.

The assurance of EU decision-makers concerning the steps taken to prevent the burden being passed on to SMEs is not credible in our opinion. We would like to remind that the entry into force of the General Data Protection Regulation was supposed to hit big Internet corporations, and recent analyses have shown that the largest adjustment costs are borne by small and medium enterprises. Big corporations employing hundreds of well-paid lawyers will always manage. Besides, that it is difficult to mitigate the risk of transferring costs to clients / SMEs was shown in the case of the bank tax, which was also to be a burden for banks and was transferred on to their clients.

Additionally, the Internet economy sector is one of the most innovative and fastest growing parts of the Polish economy. ZPP fears that the increase in costs associated with running a business will negatively affect the innovation of these companies and, as a result, will reduce Poland’s economic growth.

Furthermore, it is estimated that when determining a 3% tax rate, the new tax could generate EUR 5 billion per year for Member States. However, the EC did not present what part of these funds would be allocated to Poland. The Union expresses its concern that the expected fiscal effect will not offset the negative effects on the Polish economy.

In view of the above, we call on the Polish authorities, in particular the Ministry of Finance, which represents Poland in these negotiations, to present analyses how the new burden will affect the SME sector and impact its competitiveness. We believe that any proposals for introducing new business taxes must be supported by credible, public evidence, not only regarding fiscal and budgetary influence, but also analysing the broader economic context, such as competitiveness, innovativeness of the economy and economic growth.

The Union of Entrepreneurs and Employers believes that only after carrying out the above-mentioned analyses, Poland will be able to fully deliberately decide on further steps regarding the so-called digital tax.

 

26.11.2018 Position of the Union of Entrepreneurs and Employers on the digital services tax

 

Fot. geralt/pixabay.com

Warsaw, 6^th November 2018

 

The outflow of immigrants from Ukraine to the West is a real threat to the our economy – Poland may lose up to 1.6% GDP

 

Poland faces a real problem related to the risk of a significant economic slowdown, which may be caused by the outflow of over half a million workers from Ukraine to Western Europe. According to experts of the Union of Entrepreneurs and Employers, avoiding such a scenario will be possible if a coherent migration policy is created, largely with a wise absorption of economic migrants from proven directions in mind.

This topic was discussed in a broader context in the memorandum titled “The worst case scenario takes place – will Poland lose employees from Ukraine to Germany”, presented by the Union of Entrepreneurs and Employers on November 6^th this year during a press conference.

“We are anxiously observing the situation related to the insufficient supply of labour in Poland, and hence the related lack of workforce, which is increasingly often publicised in nationwide media. Since 2016, we have been calling for a coherent migration policy with procedures for employing Ukrainian citizens simplified to the maximum extent, as well as from other nations whose representatives are already working in Poland and contributing to the creation of GDP,” says Jakub Bińkowski, Secretary of the Law and Legislation Department at the Union of Entrepreneurs and Employers.

In his view, the next step in the economic context related to taking care of shortages on the labour market is to create a transparent path to obtain the right of permanent residence, and later citizenship for immigrants from countries east of the Polish border.

As one can read in the Union’s memorandum, “according to the estimates of the National Population Council, by 2050 Poland should receive 5 million economic migrants to maintain the current pace of economic development”.

Experts of the Union of Entrepreneurs and Employers agree that the continuation of the good economic situation will not be possible thanks to only short-term actions consisting in satisfying the country’s current needs and attracting immigrants for a short time, for example, due to the seasonal increase in labour demand.

“Virtually all EU member states, suffering from significant shortages of the working age population, are facing an analogous challenge. This is a very big threat not only to the current pace of economic development, which must decrease in a situation when fewer and fewer people are working, while more and more are on pension benefits, but it is also a threat to the stability of the pay-as-you-go pension system, and consequently – the situation of state budgets,” comments Tomasz Wróblewski, President of the Warsaw Enterprise Institute. “It is then no wonder that other European countries are very keen on acquiring a large group of immigrants taking up paid employment who assimilate easily.”

The introduction by Western countries of visa-free travel for workers from Ukraine, effective from 11^th June 2017 (Ukrainian citizens do not need visas to enter the EU, this entitlement has been limited to 90 days over a period of 6 months, and trips can take place on business, tourist and family purposes), caused that in the first month of the new regulations being in force, the EU border was crossed visa-free by over 95,000 Ukrainians. At the same time, the dynamics of economic migration to Poland from the Eastern direction dropped significantly – data from the Ministry of Labour and Social Policy show that in the first half of 2018, 13 percent fewer statements were registered concerning the intention to entrust work to a foreigner compared to the previous year, which is a reversal of the trend from the last few years, i.e. in principle a continuous increase in the number of registered declarations.

“The Union of Entrepreneurs and Employers for many months presented its recommendations regarding the creation of a programme aimed at retaining economic migrants from Ukraine and other eastern countries in Poland. Unfortunately, we state with concern that Germany today is preparing to open its market for employees from outside the European Union. The German government wants to increase the inflow of qualified labour force while adjusting it to the needs of the labour market – the overriding objective here is to secure employees with vocational education,” says Katarzyna Niemyjska, Director of the Law and Legislation Department at the Union of Entrepreneurs and Employers. “Germany, as a result of a quick and simple procedure, is to recognise qualifications acquired outside the EU, to carry out extensive promotional activities encouraging people to work in Germany, and to offer support in learning the German language.”

The implementation by the Germans of the plan they presented will have a particular impact on the Polish economy. It can be assumed, and there are studies on this subject, that a large part of workers from Ukraine staying in Poland will decide to move to the West. This means an outflow to Germany of a large part of the labour force we need, which will cause great difficulties for entrepreneurs, but also macroeconomic problems. According to the Union’s estimates, in a moderate scenario assuming the outflow of 500,000 immigrants from Ukraine from the labour market, the potential GDP loss will amount to 1.6%, which is equivalent to 1/3 of the GDP growth dynamics in 2017. In the context of the imminent economic slowdown, this loss would be even more severe.

According to the Union, there is need for urgent governmental activity aimed at the implementation of measures to prevent the situation when a significant shortage of workforce in Poland becomes a fact and significantly affects the situation of entrepreneurs who will have difficulties conducting their businesses with a large number of job openings, while consumers will have to pay more for the same services and products. As a result, the state will also lose, because Ukrainians spend their money in Poland and their wages are normally taxed.

 

Memorandum of the Union of Entrepreneurs and Employers – “The worst case scenario takes place – will Poland lose employees from Ukraine to Germany”

 

 

Fot. skeeze/pixabay.com

Warsaw, 30^th October 2018

 

Polish Federation of Food Industry becomes member organisation of the Union of Entrepreneurs and Employers

 

The Polish Federation of Food Industry Union of Employers joined ZPP – the Union of Entrepreneurs and Employers. The organisation was established to ensure effective participation of business entities in creating legal, organisational and economic conditions for the development of the food sector – one of the largest and strongest branches of the Polish economy. PFFI members are leading companies and organisations present on the broadly understood food market in Poland. For many years, the Federation has been helping its members build their strong position on the market. Companies associated in PFFI employ 40,000 employees.

PFFI bases its activity on three basic pillars:

• Organisation – only by acting together, companies can effectively represent their positions,
• Cooperation – creating a unique platform for cooperation between companies,
• Influence – PFFI representatives actively present positions and opinions developed in the working committees of the Federation.

Poland’s integration with the European Union set new challenges for Polish enterprises. Since 1999, the Polish Federation of Food Industry Union of Employers is the only Polish organisation that has membership status of the largest organisation of EU’s food producers, the Confederation of Food and Drink Industries of the EEC (FoodDrinkEurope).

PFPŻ represents the Polish food industry at the institutionalised forum of the entire food industry in the European Union. It monitors and informs affiliated companies about any and all changes in EU food regulations, and since 2004 it enables Polish enterprises to actively participate in shaping them.

 

Fot. rawpixel/pixabay.com

Warsaw, 29^th October 2018

 

The fight again the tobacco grey zone

 

Smart excise policy, regulatory solutions that tighten tobacco cultivation and drought trading regulations, as well as intensified operations by authorities – these are the factors that made it possible to reduce the grey zone of tobacco products by around a half over the last 3 years – according to the fourth Business Paper of the Union of Entrepreneurs and Employers.

According to common knowledge, the grey economy is a very unfavourable phenomenon for the economy. Particularly vulnerable to fall victim to it are those sectors where non-compliance pays off best and unpaid taxes are highest. One such sector is the tobacco market. High increases in excise tax on cigarettes resulted in the fact that in 2011, excise duty per an average packet of cigarettes amounted to about PLN 6, in 2015 it was already more than PLN 8. The VAT burden also grew along with excise duty increases. Those high tax increases were not accompanied by an increase in budget revenues, which, on the contrary, were decreasing.

“Up until 2015, the government in spite of our clear warnings, stubbornly increased the excise duty on cigarettes, although it was obvious that it would not result in higher revenues,” says Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers – ZPP. “There was less and less money from tobacco excise, while the grey zone grew unchecked, from 13.9%. in 2011 up to 19% at its height in 2015. This clearly affected the legal cigarette market, which in this period shrunk by a quarter.”

At the same time, no significant legislative initiatives to tighten the system took place. Point measures were carried out, such as the taxation of dried tobacco with excise duty, but they were completely inadequate.

“The legislator’s limited activity definitely contributed to the increase of the informal economy until 2015,” says Marcin Nowacki, Vice-President of the Union of Entrepreneurs and Employers. “One would react to threats in a completely inadequate manner, introducing small, singular changes, limiting the effects of negative phenomena on the market such as, for instance, the once popular “party cigars”, but it was a drop in the ocean of needs. As a result, the grey zone of tobacco for smoking reached the level of up to 60% of the market volume.”

According to the Union’s estimates, in the years 2011-2015, the Polish state budget lost due to the tobacco produce grey zone as much as approximately PLN 25 billion in revenues.

In 2015, however, a significant change in policy took place that went beyond a simple correction. First of all, the excise tax hike was stopped. One ought to make note of the fact that in Poland it exceeds the minimum levels required by the European Union.

“For years, we have been repeating that further increases in excise tax on cigarettes will do no good, and they will even be counterproductive. The authorities eventually took it into due consideration and gave up the nonsensical increases, the result of which was visible almost immediately,” said Cezary Kaźmierczak.

Nevertheless, merely stopping the increases would not bring satisfactory results. It was necessary to take legislative action and this was precisely what happened. A number of duties and regulations were introduced regarding intermediary tobacco operators, excise security, as well as monitoring of both crops and raw tobacco trading. An obligation for all producers of raw tobacco to register themselves in a special registry was introduced.

“It turned out that it was possible to tighten the system in a regular and organized manner,” emphasises Marcin Nowacki. “Moreover, reconnaissance and operational privileges were granted to customs services, which led to the fact that in 2016, five times more illegal cigarette factories were closed down than in 2014.”

The results of the activities carried out, both in terms of excise policy, as well as legislative proposals and changes concerning authorities, are all very positive – the share of informal economy in the cigarette market fell by 6.7 percentage points, while legal market grew by almost 3%, revenues from tobacco excise duty increased by PLN 1 billion a year. Thus, we managed to reverse all negative trends caused by misguided policies of previous years.

Despite the policy’s good results, the threat of the grey zone is still real, as new risks are already on the horizon, such as the ban on the sale of menthol products. Both those products and the recommendations of the Union of Entrepreneurs and Employers in this scope will be discussed in a comprehensive report, the publication of which is planned for November this year.

 

29.10.2018_Union of Entrepreneurs and Employers Business Paper_The fight again the tobacco grey zone

Warsaw, 26^th October 2018

 

Commentary of the Union of Entrepreneurs and Employers on the adoption by the Polish Sejm of the Act introducing the third income tax threshold and eliminating the flat tax for business and the introductory law of the so-called exit tax

 

On 23^rd October 2018, the Sejm of the Republic of Poland voted on and adopted the government bill amending the act on personal income tax, the act on income tax for legal persons, the act – Tax ordinance and some other acts (document no. 2860) and the government bill on the Solidarity Support Fund for the Disabled (document no. 2848).

Both projects were subject to thorough criticism of many participants of public consultations, including ZPP – the Union of Entrepreneurs and Employers. The first of them assumes the introduction to the Polish tax system of a number of changes of very important character for business entities related to, among other things, the issue of reporting tax schemes or changes related to the tax law circumvention clause. With these are actions, the legislators intended to tighten the tax system and increase the budget revenues, but in practice they may be dangerous for taxpayers. Moreover, as part of the project, the legislator introduces the so-called exit tax, according to which income from unrealised profits would be taxed. This means a de facto taxation of an asset transfer out of Poland, as a result of which the Polish state loses in whole or in part the right to tax income from the sale of this asset, as well as the change of tax residence, as a result of which Poland loses in whole or in part the right to tax income from the sale of an asset owned by the taxpayer in connection with the transfer of his place of residence to another country.

This is a solution resulting, to some extent, from the ATAD directive – however, the Polish legislator decided to implement the provisions in a stricter manner with respect to the minimum requirements set out in the directive, including taxation also for individuals who do not run a business.

It is noteworthy that the adopted project was separated from a larger project, which had previously been the subject of public consultations and contained a number of other solutions, including preferential taxation of income from intellectual property rights or a change in the tax settlement of lease instalments costs. In the course of consultations, the Union of Entrepreneurs and Employers submitted a critical position to the project, highlighting some of the unfavourable solutions, and criticising the fact that the Polish legislator decided to implement the ATAD directive in a hurry, making the consultation process essentially illusory (only two weeks to submit comments to a very extensive project, while consulting the new Tax Ordinance at the same time), although the time for transposition does not pass until the end of 2019. Our position in this respect remains unchanged – we strongly oppose the introduction of the new tax solutions, so deeply interfering with taxpayers’ interests, in such a short time, without taking into account any of the comments made in the course of public consultations, and without an in-depth analysis or discussion of CJEU jurisprudence concerning the exit tax concept and its influence on the final shape of Polish regulations.

During the same plenary session, a second bill was also passed – on the Solidarity Support Fund for the Disabled. This fund is to be financed from contributions levied on employees’ remuneration and a new tax at the rate of 4%, whose taxpayers will be persons with annual income of at least PLN 1 million. It is worth noting that the amount of the said contribution has not been specified in the Act – it is to be determined on an ongoing basis in the Budget Act. In fact, the Polish legislator, under the pretext of creating a new Fund (largely identical with the existing PFRON – State Fund for Rehabilitation of Disabled People), decided to increase non-wage labour costs (what is worse – in the amount not permanently specified in the Act), as well as the liquidation of the linear income tax from business activity and the introduction of a third tax threshold at the level of one million zlotys. The Union of Entrepreneurs and Employers has already strongly criticised this idea several times, pointing to its anti-development character, as well as the danger of introducing far-reaching changes in the future, aimed at creating a progressive system of income taxation in Poland.

To sum up, on 23^rd October, the Polish Sejm adopted two bills introducing significant changes that are unfavourable for taxpayers. As is clear from the voting information, unfortunately, only a few MPs opposed these initiatives, which we leave for consideration in the context of the upcoming parliamentary elections.



Fot. Photo RNW/ na lic. Creative Commons/ flickr.com