Warsaw, 10^th October 2018

 

Position of the Union of Entrepreneurs and Employers on rising energy prices 

 

Electricity prices constitute a very important parameter for all participants of a state’s economy. For entrepreneurs, naturally, expenditures on electricity embody a cost that is particularly acute for production enterprises with high energy consumption. For distributors, rising electricity prices mean higher risks (these entities become, in principle, hostages of the situation they found themselves in – they distribute a product whose prices grow in a fashion completely independent from them). From the point of view of a consumer, more expensive electricity (ergo higher costs of enterprises) is associated with an increase in the prices of products and services. In addition to all of the above, everyone obviously uses electricity also at home, independently from their economic activity. In connection with the above, rising electricity prices are no good piece of information for market participants. Therefore, it is necessary to consider the reasons behind this phenomenon and potential ways of solving this very problem.

Offer prices for energy sales for 2019 for business oscillate at a level, depending on the specifics, circa PLN 350-480 per one megawatt hour (1MWh), whereas this year the business was getting electricity for PLN 210 per 1 MWh. This means that next year at least a large part of entrepreneurs will have to pay for electricity more than a half more than they paid over the present year. This state of affairs will not remain without impact on the entire economy, including – which seems to be particularly sensitive from a political point of view – the situation of consumers and households. Therefore, drastic increases in electricity prices have recently become such a popular topic in the media.

First and foremost, it should be noted that the problem is not of a temporary nature. A transient increase in electricity prices would obviously be worrying at the time, but in the long run, it would not have significantly impacted the economy. However, according to estimates of the Institute for Renewable Energy, after 2020, Poland, having set up an energy mix based in half on coal and supplemented with nuclear energy and renewable sources, will have the highest in Europe wholesale energy prices and tariffs for all recipient groups. Such forecasts indicate that the problem of rising energy prices in Poland is of a strategic nature and does not constitute only an interim economic hardship.

As for the reasons for rising electricity prices, one must state that they are largely external and, as a rule, independent from Polish decision makers. One of the basic reasons mentioned by analysts is a drastic increase in the prices of CO₂ emission fees.

Within the European Union, there is a system of emissions trading, which is a de facto key element of the Community’s climate policy. It consists in the fact that every year, there is a certain number of CO₂ emission permits on the market. Such a permit gives the holder the right to emit one metric tonne of carbon dioxide. In 2013, the number of 2,084,301,856 permits was established, which until 2020 will be decreasing annually at the rate of 1.74%, and from 2021 to 2030, by 2.2 %. Emission permits are allocated to companies through auctioning and can then be sold on the open market by means of a stock exchange. In the autumn of 2017, the price of one permit equalled on average approximately EUR 6. At the moment, the price has increased to EUR 25, and in the near future, it is not entirely impossible that it breaks the level of EUR 30, and some analysts mention the possibility of reaching the level of EUR 100 in the long term. The Polish power industry, based in 85% on coal, is additionally high-emission (about 770 kg of CO₂ per one megawatt hour, whilst in Germany, it is only about 420 kg per 1 MWh), which means that changes in the prices of permits for CO₂ emissions directly translate into energy prices in our country. In the long term, the problem may turn out to be even more severe, as due to the fact that Poland had surpluses of CO₂ emission permits, some producers received them for free. In the near future, these entities will have to participate in auctions, which means an increase in demand for permits, and therefore a further increase in prices.

Considering the above, one must not forget about the second, no less important, component of the problem, that is coal prices. At the beginning of July this year, coal prices in Australia exceeded the level of USD 120 per metric tonne. Coal was so expensive for the last time in 2012. The increase in coal prices is almost directly attributable to China’s growing demand for this raw material. Undoubtedly, there are several reasons for the increased demand – analysts indicate, among others, an exceptionally warm summer, but it is not without significance that Chinese industry is growing dynamically, and at the same time, China does not have any CO₂ emission limits adopted by EU countries. Coal prices on world markets are very important for Poland, as about 20% of the raw material used in the country is imported. Coal mining in Poland is expensive, because it comes from proper mines, not strip mines, as it is in Australia.

To recapitulate, in view of the current perturbations on the global markets, two unfavourable factors – from the point of view of energy prices in Poland – accumulated, which are: the increase in the prices of permits for CO₂ emissions and the increase in coal prices. At the same time, more and more expensive electricity in Poland is at the moment only part of the problem, because, in the long term, we can even expect a gap in electricity supply. According to estimates, our demand for power may increase by 2030 from 26 gigawatts to 33 gigawatts. Simultaneously, there are no new power plants in Poland that could meet growing needs for energy, and more than 60% of existing installations are already this old that soon they will no longer be able to continue their operations. Consequently, the power grid in Poland requires far-reaching and continuous modernisation, which would cost the budget tens of billions of zlotys.

Taking into account the above facts and forecasts, one must admit that the discussed situation has a direct negative impact on the competitiveness of the Polish economy. Within a few years, we may have the most expensive electricity in Europe, and already at the moment, large customers pay significantly more per one megawatt than other countries in the region (approximately EUR 69 in Poland vs. EUR 57 in the Czech Republic or EUR 38 in Germany). This, of course, translates into operating costs of enterprises, their competitive position relative to other European entities, product prices, and ultimately also into the costs of maintaining a household. No wonder, then, that the problem was addressed by both the Ministry of Energy, which explained the reasons behind higher prices, as well as the largest Polish energy companies that discussed their investment plans during the proceedings of the Energy and Treasury Committee of the Polish Sejm.

Pursuant to the above-mentioned facts, we consider it reasonable for the government to conduct remedial actions as part of the formulation of Poland’s energy policy. Therefore, we draw attention to the need to create a framework and to stimulate the formation of energy clusters, i.e. agreements concluded by means of contracts between locally operating entities that deal with the production, consumption, storage and sale of, among others, electricity (but also heat or fuels). Investing in distributed energy, as well as improving the regulatory framework for energy clusters (the definition of a cluster was only introduced into our legal system in mid-2016, and is, therefore – from a legal point of view – a relatively young formula), becomes necessary to balance future demand for energy – clusters concentrate in different energy sectors, and by strengthening the decentralisation of production, storage and supply, they also significantly reduce the risk of a blackout.

At the same time, efforts should be made to increase the share of “green” sources in the Polish energy mix, including in particular wind farms, along with those built on the sea. This is a de facto necessity resulting from both permanent and objective conditions, such as inefficient methods of extracting the key raw material for the Polish energy industry, which is coal and growing demand for electricity, with insufficient number of production units, as well as political conditions resulting from climate regulations adopted at the level of the European Union. For this reason, in order to maintain the competitiveness of Polish entities on international markets, we call for – apart from reacting to the current situation – long-term and strategic activities.

 

Union of Entrepreneurs and Employers

 

Fot. magro_kr/ na lic. Creative Commons/ flickr.com

Warsaw, 11st October 2018

We’re opening the Freedom Lounge

 

In the former headquarters of the Communist Party, the building in the very center of Warsaw that housed the Central Committee of the Polish United Workers’ Party, the Warsaw Enterprise Institute opened the Freedom Lounge. It was created with conservative and free-market youth in mind – a place where youth organizations will be able to organize their events free of charge, use the in-house television studio, develop of their professional careers, as well as for socializing and entertainment purposes. WEI will help them successfully achieve their goals.

The Freedom Lounge consists of three levels. The underground floor is where the conference room for 60 people is located, on the ground floor, there is a bar and canteen, whereas on the mezzanine, there will be a television studio.

We would like to invite all ambitious young people to cooperate with us. If you are interested in this project, please contact Tomasz Kołodziejczuk – t.kolodziejczuk@wei.org.pl, +48 661 616 522.

We would like to thank our partners – Orange, PKP Energetyka, the PGNiG Foundation, Philip Morris – and other companies and institutions that supported us in this undertaking.

Since the Liberty Lounge is located in the building that once used to be home to the Central Committee of the communist Polish United Workers’ Party – we may also speak of personal satisfaction, as we ourselves contributed into fighting against this place’s previous tenants.

 

 

Cezary Kaźmierczak, Union of Entrepreneurs and Employers
Tomasz Wróblewski, Warsaw Enterprise Institute

Warsaw, 26^th September 2018

 

Busometr ZPP Index:
Entrepreneurs in a good mood – record-high Busometr index

 

In entrepreneurs’ view, the Polish economy is in a good condition. This is indicated by the latest forecasts of the Union of Entrepreneurs and Employers discussed in the next edition of the Busometr Index survey, which had a reading of 56.8 points. This result is 12.13 points higher compared to the results from the 1^st half of 2018.

The overall value of the Busometr Index was influenced by the “economic situation” component, which currently stands at 55.4 points. One can see a significant increase here compared to the 1^st half of this year (when the value of the component stood 41.75 points). As many as 39% of entrepreneurs are of the opinion that in the months to come the economic situation will improve, while 25% expect it to deteriorate.

It should be emphasised that from this measurement on, the Busometr index is realised using a different business database (previously, this used to be the database of the Union of Entrepreneurs and Employers – ZPP; currently, that of the Ariadna National Research Panel). The sample structure in terms of the size of the companies surveyed in this measurement and the previous ones does not differ, but the demographic structure of the respondents has changed considerably. This change may be partly responsible for the observed increase in indices.

“In the latest edition of the study, we have noticed a very dynamic growth in every indicator analysed as part of the Busometr Index,” comments Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers. “Perhaps the change in the demographic structure of the respondents has impacted the situation, but undoubtedly the reading results for the 2^nd half of 2018 reflect a clear trend: entrepreneurs observe excellent economic conditions and are willing to make use of them, for instance, by investing their money.”

The least concerned about the economic situation in the country, in terms of the next six months, are entrepreneurs from the commerce sector (here the index reached 61.32 points), followed by production and services sectors (59.11 and 51.06 points, respectively).

The value of the ZPP Busometr Index was also influenced by the other two components – the labour market and investments.

Regardless of the size, region, sector or the age of an enterprise, the moods of entrepreneurs in the area examined in terms of the component “labour market (wages and employment)” is at a decent level of 61.9 points. In the case of “wages”, the barometer amounted to 62 points, with 43% of entrepreneurs declaring an increase in remuneration in the near future. In terms of “employment” 42% of respondents plan to increase it.

“The fact that almost half of entrepreneurs plan pay rises, is not at all surprising,” claims Cezary Kaźmierczak. “We are dealing with insufficient labour supply today, entrepreneurs are competing for employees, hence wage increases are natural. Due to the good economic climate and dynamic growth in consumption, companies can afford to offer higher wages.”

A significant increase can also be seen in the “investments” component – the latest reading is at 53.7 points. (increase by 10.24 points with respect to the previous Busometr measurement). As many as 64% of respondents declare that they will invest over the next six months, while 36% of respondents do not plan to invest. Medium-sized and large enterprises as well as enterprises operating within the production sector are most optimistic in this respect (63.1 points).

***

Busometr ZPP – the Index of Economic Mood in SME Sector is an economic barometer illustrating the level of optimism in small and medium enterprises, and their plans for the coming six months.

Three components affect the index: (1) the economic situation, (2) labour market (remunerations and employment) and (3) investments.

A value within the range of 0-100 is assigned to each component.

The Union of Entrepreneurs and Employers along with Maison Research House conduct the research among a representative group of small and medium enterprises (up to 250 employees). Busometr ZPP is published every six months.

Small and medium enterprises constitute in Poland 99.8% of all the companies in the country. They create three quarters of the work places and generate 67% of GDP.

 

26.09.2018 ZPP Busometr Index. Forecast for 2^nd half of 2018

Warsaw, 19^th September 2018

 

The economy and state budget are in good shape

 

 

Both the financial situation of the budget and the results achieved by enterprises are getting better, as the latest Business Paper by the Union of Entrepreneurs and Employers regarding the financial condition of the Polish economy describes. However, there are threats appearing on the horizon.

The financial condition of an economy can be analysed from two angles. The first is the issue of the situation of public finances. In this respect, Poland has seen a clear improvement recently. With a gradual increase in budget expenditures, revenue increased even more, especially in terms of VAT.

“One can clearly see the results of the coexistence of two factors, i.e. the excellent economic situation, manifested by the increase in internal demand and the tightening of the tax system in the field of counteracting extortion of VAT refunds,” says Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers. “These two elements have significantly contributed to the reduction of the deficit, as the revenues from taxes on goods and services constitute the main component of budgetary tax revenues,” he adds.

In 2017, the lowest budget deficit was achieved in ages. At the same time, however, due to the excellent economic situation in the world, some countries have recently recorded a budget surplus, while in Poland a long-term deficit has been maintained for a long time. As a result, the debt of the public finance sector is growing, even though the situation of the budget recently can be described as good compared to previous years. While indirect taxes, in particular VAT, are of key importance to budget inflows from the point of view of revenues to the budget, the greatest threat to the stability of public finances seems to be the expenditure related to the execution of compulsory social security benefits, which are already the most important component of budget expenditures (in 2017, we spent almost twice as much on them than on family benefits, including 500+).

Apart from the relatively good situation of the state budget, attention should be paid to the financial condition of enterprises. Their revenues have recently increased dynamically, although large companies play a major role in this respect. It is enough to mention that in 2017, they achieved an average income of PLN 578 million, while medium-sized and small companies achieved an average income of PLN 29 million. At the same time, micro-entrepreneurs could in 2016 boast an average revenue of PLN 520,000 – merely four years earlier, this was only PLN 460,000. Therefore, there is no doubt that economic entities of all sizes are achieving higher and higher revenues, however, the disproportion between SMEs and large enterprises is very large, which naturally results from the specificity and scale of their operations. Interestingly, in small companies we can observe a slightly higher share of wages in total costs than in the case of large entities.

“Revenues of business entities are growing regularly, but we have in fact experienced increased dynamics recently,” says Jakub Bińkowski, Secretary at the Department of Law and Legislation of the Union of Entrepreneurs and Employers. “The result thereof is that entrepreneurs have accumulated a record amount of savings on their bank accounts. At the same time, micro-enterprises have a relatively small share in the revenues generated by companies in spite of a clear advantage in terms of their number.”

To sum up, Polish economy is clearly gaining from the excellent economic situation, from the resourcefulness of Polish entrepreneurs, as well as from the tightening the tax system. However, the question remains unanswered whether – especially in the area of budgetary discipline – are we taking advantage of the current conditions to a sufficiently high degree.

 

19.09.2018 Business Paper by the Union of Entrepreneurs and Employers – Financial condition of the Polish economy

 

 

Fot. Martin Henriksen / tempest.dk

Warsaw, 5th October, 2018

 

Position of the Union of Entrepreneurs and Employers on the proposed text of the directive on the reduction of the impact of certain plastic products on the environment

 

The draft Directive on disposable plastic products by the European Commission raises strong concerns of the business community. In the long-term, it will affect many Polish entities in a strongly negative way, significantly worsening their situation.

 

It should be noted that the original proposal raises far-reaching concerns, but the situation is getting even more dangerous, as in recent weeks there has been a significant tightening of the course taken. Members of the European Parliament have made numerous amendments, two of which disproportionately and in an ill-considered manner hit the Polish tobacco industry. This is important inasmuch as in this industry Poland has a strong competitive advantage over other EU markets, both in terms of production volume as well as the size of investments and employment. The concerns about the shape of the draft Directive and the amendments tabled is only reinforced by the fact that the vote in the Committee on Environment, Public Health and Food Safety (ENVI) will take place on 10^th October while the works in both the Council and the European Parliament are held on the principle of the so-called “fast track”.

 

The first amendment proposed by EU parliamentarians concerns the introduction of additional information obligations for manufacturers of tobacco products regarding appropriate methods of disposal of garbage, the effects of illegal littering, and information about the presence of plastic in the product. One must note that the appearance of a cigarette pack is already regulated by numerous legal acts. Relatively recently, the appearance thereof has been significantly interfered with, imposing on manufacturers the obligation to put health warnings on the packaging of tobacco products relating to the effects of tobacco use. The proposal to impose additional obligations on manufacturers of tobacco products in terms of informing about the proper ways of disposing of garbage, the consequences of illegal littering, or the content of plastic in the product, raises legitimate objections. It must be emphasised that the European Commission took the above-mentioned conditions to be considered when designing the directive in its current shape.

The second amendment aims to reduce the use of cigarette filters, i.e. of the elements that have a key health impact as far as the product goes, which is to limit the amount of harmful substances that end up in consumers’ organisms. The observance of acceptable concentration levels of certain substances (resulting from legal acts of the European Union) requires the use of filters with appropriate properties. It must be highlighted that despite of the fact that many studies have been conducted over the years, one has yet not managed to find an appropriate substitute for the currently used cigarette filters. Any limitation to the possibility of using filters is therefore tantamount to an adequate limitation of the production and sales of tobacco products. In practical terms, this would entail a real risk of production reduction or even closure of factories of tobacco producers in Poland. In the tobacco industry, there would be reductions of employment, while the revenues to the state budget due to excise tax on tobacco products would be significantly reduced. It seems that the scale of the potential negative effects of accepting the amendments proposed by Members of the European Parliament is large enough to clearly oppose them.

 

In recent years, Western European countries moved the production of tobacco products to the east, primarily to our country. Polish factories, serving hitherto the our local market, started to manufacture products for exports – in total to a several dozen countries. Poland became the industry leader. Presently, the Western European countries are pushing the solutions described above, which will result in the elimination of the established market position of Polish factories, as well as the mass dismissals of tobacco industry employees.

 

We recognise the need of legislation and the importance thereof, aimed at reducing the amount of plastic in the natural environment. However, we would count on actions to be undertaken that represent a wider socio-economic compromise.

 

 

Fot. marcin049/pixabay.com

Warsaw, 12^th September 2018

 

The tax interpretation system in Poland requires a far-reaching reform, because in its current shape it does not guarantee the taxpayers adequate protection against the negative effects of amending or repealing interpretations – this is the fundamental conclusion included in the latest publication of the Union of Entrepreneurs and Employers published as a Business Paper.

The Polish tax system is one of the most tax payer-unfriendly ones in Europe – the perfectly testament to this state of affairs is Poland’s 51^st place in the last edition of the Paying Taxes ranking. More than 75% of entrepreneurs believe that legal instability is one of the biggest obstacles to running a business. Therefore, there is no doubt that Poland has a serious problem with its tax system.

“For years, we have been appealing to consequent governments for a radical change of the tax system, which is disastrous, but our petitions are in vain and things get worse,” claims Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers. “Even when we published our document containing a thoroughly described concept of a reform, along with all the necessary calculations, there was hardly any interest on the politicians’ side to initiate change. This serves as perfect proof that the quality of the tax system is not among the real priorities of successive administrations. What counts above all is that there are sufficient funds going to the budget. It is of secondary importance to politicians how much of a cost this state of affairs is to entrepreneurs.”

Institutions that were introduced to mitigate the effects of tax law provisions ambiguity are individual and general interpretations of tax law. The former relate to a specific factual situation or a future event described in a given motion; the latter in turn is issued by the Minister of Finance in order to unify the application of tax law by the authorities.

Over the past several years, we have seen a clear decreasing trend of the number of individual interpretations issued: in 2017, there were only slightly over 25.5 thousand of them issued, the least in a decade. The vast majority of interpretations refer to VAT, which clearly shows that it is this tax that causes the most problems to taxpayers.

“Indeed, the number of individual interpretations issued is falling and it seems that this is the consequence of the fact that entrepreneurs see how little protection they give them,” says Jakub Bińkowski, Secretary of the Department of Law and Legislation of the Union of Entrepreneurs and Employers. “The original concept of legal certainty, guaranteeing taxpayers that they will not suffer from the negative effects of amending or repealing interpretations, gave hope that this level of protection would increase. Unfortunately, in the course of the work, this structure was significantly changed”.

Moreover, there were also fewer general interpretations issued in 2017 than in the previous year, because there were only 6 of them. Is this the result of an improvement in the quality of the tax system in Poland? According to Cezary Kaźmierczak: certainly not.

“The quality of the Polish tax system has been bad for a long time and I do not see any radical improvement in this respect,” comments the Union’s President Cezary Kaźmierczak. “So I appeal to the government once again to simplify the regulations and allow entrepreneurs to run their businesses, rather than spend countless hours interpreting new laws and regulations.”

12.09.2018 Business Paper of the Union of Entrepreneurs and Employers – Tax interpretations in Poland (in Polish)

Fot. hammer 

Warsaw, 23^rd August 2018

The development of innovative enterprises possible thanks to the implementation of the 5G network

Polish economy can benefit greatly from the development of wireless communication and 5G technology. The revolution in this field will be possible thanks to the harmonisation of power density limits in Poland with the standards accepted as safe by the World Health Organization and the International Commission on Non-Ionizing Radiation Protection (ICNIRP), as well as thanks to th execution of new investments and infrastructure modernisation.

On August 22^nd, the daily paper “Gazeta Polska Codziennie” organised a debate to which representatives of government administration and business environment were invited. They talked about the need to create an ecosystem necessary for technological development in Poland, as well as what should be done to make telecommunications investments take place faster while at the same time, state control is maintained over them.

The guests who discussed the role of modern technologies in the execution of “Plan Morawieckiego” (an economic framework created by Prime Minister Mateusz Morawiecki) were Jadwiga Emilewicz – Minister of Entrepreneurship and Technology, Jerzy Kwieciński – Minister of Investment and Development, Marek Zagórski – Minister of Digital Affairs, Cezary Kaźmierczak – President of the Union of Entrepreneurs and Employers, and Mirosław Godlewski of Boston Consulting Group Poland.

Mirosław Godlewski, Senior Advisor at BCG Poland, pointed out that one of the key barriers affecting the technological revolution, understood as the development of the 5G network, are currently the lowest and most restrictive in Europe PDLs (power density limits). The expert pointed to the constantly growing demand for data transmission. In his opinion, the surplus of demand over supply in this respect will amount to over 30% in two years.

“Without raising and harmonising the power density limits in Poland to the standards in force in other European Union countries, we will not be able to develop the 5G network,” said Mirosław Godlewski.

According to the BCG Report “The impact of PDL (Power Density Limits) on wireless connectivity: is there a threat of delays in 5G development in Poland?”, already today, restrictive power density limits have a negative impact on the mobile Internet service in Poland. None of the largest European countries, such as Germany, the United Kingdom or France, imposes such stringent restrictions on their mobile Internet sector.

Do we want to benefit from transformation?

“4G technology led to digitisation. 5G can lead to smartisation, both in the public and private sectors,” claims the Minister of Entrepreneurship and Technology Jadwiga Emilewicz. “Many analyses indicate that the implementation of new communication technologies, such as 5G, will significantly translate into dynamic economic development of a given country and, consequently, will positively affect the situation on the labour market.”

The Minister pointed out that the creation of a basic infrastructure for the development of the 5G network is crucial for the development of smart cities, telemedicine, transportation and other sectors, such as the financial services sector. “By 2020, we should have several urban centres Poland that stimulate the development of 5G networks,” she added.

“5G technology is one of the most ground-breaking that have appeared in recent years. We see many branches of the economy in which its use will be crucial: transportation, telemedicine, industry,” said Jerzy Kwieciński, head of the Ministry of Investment and Development. “Europe is lagging behind the rest of the world, especially Asia and the United States, in term of 5G networks’ development. One of the developmental barriers is the legal environment. The already mentioned most restrictive power density limits are another. Baltic countries also have a bandwidth problem. Even half of Poland is covered by ‘interferences from the East’.”

The Minister stressed that the Strategy for Responsible Development assumes financing for the development of the 5G network and this is one of the high priority tasks. “We have to systematically introduce changes in the legal environment, but also have to make the requirements related to the investment process more business-friendly, while taking into account social conditions,” he summarised his opinion.

The Minister of Digital Affairs Marek Zagórski, who also took part in the debate, discussed the importance of modern technology which translates into the improvement of people’s quality of life, as well as the infrastructure necessary for its development.

“5G technology consists of several elements: base stations, investments by telecommunications operators, construction of a fibre-optic network. Currently, at the Ministry we are working on a IT system that will support the expansion of a 5G network. Another issue is related to the development of the implementation program in terms of simplifying and shortening the investment process. It is also necessary to reduce local fees introduced by local governments, which make it difficult, for example, to build fibre-optic networks,” said Marek Zagórski.

Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers, pointed out that Europe is losing to Asia and America through numerous and complicated regulations: “Unless we get rid of the shackles of bureaucracy, not only in this field but also in others, our domestic business will be far behind our competitors from abroad. I appeal to the government for prudence in implementing new regulations.”

What needs to be done first in order for the 5G network to be implemented in Poland?

“Good infrastructure, broadband network covering, if possible, the entire territory of Poland, shortening the construction and modernisation period for broadband stations, full implementation of the European Electronic Communication Code and implementation of the pilot program for 5G network development are challenges that we have to face,” summarised Minister Jadwiga Emilewicz.

Minister Jerzy Kwieciński assured that when it comes to economic experts, the conviction about the importance of this technology seems to be a fact. He also mentioned the need to create a friendly legal environment for the implementation of investments in this area and to convince the public that 5G technology is really safe.

“Finance is the subject concerning the development of 5G networks most often addressed at the Ministry of Investment and Development. It seems that this will not be a big problem – a good legal framework will translate into the fact that business will want to invest in this type of undertakings. 5G technology will be an additional drive for the development of the entire economy,” assured Minister Kwieciński.

Marek Zagórski from the Ministry of Digital Affairs pointed out that quick administrative decisions will have a significant impact on the construction of the network. He also said that the changes would primarily benefit business. In his opinion, it is of key importance to educate this group about the benefits of developing a 5G network.

Cezary Kaźmierczak representing the Union of Entrepreneurs and Employers highlighted the fact that the most important aspects of implementing such changes are political leadership, courage, and determination.


Photo: ZPP

22^nd August 2018

Employers’ organisations and NGOs that support foreigners living in Poland jointly appeal to Elżbieta Rafalska (Minister of Labour and Social Policy) and Jadwiga Emilewicz (Minister of Entrepreneurship and Technology) to introduce systemic changes that will improve the process of legalising foreigners’ stay and employment in Poland. Not assigning employees to specific employers, informatisation of the system of legalising the work of foreigners, changing the competences of Chief Labour Inspectorate PIP are but a few of their postulates.

Employers’ associations and social organisations speak with one voice regarding the amendments to the Act on the Labour Market proposed by the Ministry of Labour and Social Policy. The amendment concerns the employment of foreigners in Poland.

“Work on a new regulation is a good moment to re-engineer the assumptions of the employment process for foreigners in Poland, and not only to introduce minor adjustments to existing solutions”, we read in a letter signed by professor Witold Klaus, President of the Association for Legal Intervention.

The letter to the ministry was signed by the following organisations: Business Centre Club, Polish Chamber of Commerce, Union of Entrepreneurs and Employers, Centre for Migration Research Foundation, Polish Migration Forum Foundation, Helsinki Foundation for Human Rights, Bread and Salt Initiative, Institute of Public Affairs, Homo Faber, Association for Legal Intervention, Association for Multicultural Society Integration. What do they demand?

1. More freedom for employees

The current regulations stiffen the labour market and lead to strengthening the already privileged position of the employer towards foreigners who find it harder to assert their rights in case of being abused or falling victim to an abuse of rights. This is due to the fact that the legalisation of work is closely related to the legalisation of stay, and the loss of employment leads in principle to the loss of the legality to stay.

A new form of a work permit could therefore be issued to a foreigner for a specified period of time, but to provide services to any employer. In the minimum variant, it would be possible to introduce restrictions on working only in a specific profession or only in a specific area (e.g. one voivodship).

2. Legal employment upon submission of documents

It would also be appropriate to introduce a principle that the work of a foreigner is considered legal from the moment of submitting a formally valid application, containing all the required documents regarding the legalisation of work. In that case, delays resulting from a prolonged wait for a document to be issued by the appropriate office would not unnecessarily burden enterprises or foreign employees. Thus, obtaining a work permit or a declaration of entrusting work to a foreigner would only confirm the legality of their employment.

3. Permission to work as a “reward” for legal work

Another important systemic change would be to show greater confidence in foreigners who have so far acted legally, i.e. they worked legally. After a certain period (e.g. 3 years) of such work, foreigners would receive a general permit for a legal stay and work in Poland for a period of, for instance, 5 years.

4. Permission-free employment for graduates

All high school or university alumni who completed their education in Poland should receive the opportunity to work without a work permit as well as obtain a residence permit for this purpose for 3 years, and then having documented employment in the above-mentioned period, a permanent residence permit. The challenges facing the Polish labour market also require extending rather than narrowing the current regulations.

5. Automation and informatisation of the foreigners’ employment legalising system

Procedures related to employing foreigners should take place online without the need for employers to appear in offices. All submitted documents could be confirmed by an electronic signature (or analogous systems, e.g. a trusted profile on the e-PUAP platform). This way, employers would fill out an online application, attach scans of relevant documents to it and could generate a relevant permit / statement after the verification of the application by a clerk appriximately 2-3 days after the application submission date.

6. Operational changes of the Chief Labour Inspectorate’s prerogatives to transform it into an institution offering only help and assistance

The Chief Labour Inspectorate should be deprived of investigative functions, checking the legality of foreigners’ employment and punishing them for working without proper permits. The Inspectorate – as it takes place in case of Polish employees – should be an institution only providing support and assistance that can be contacted without fear of negative consequences associated with this action.

The full contents of the letter with comments on the proposed changes can be found here.

Recommendations on improving the process of legalisation both employment and stay of foreigners in Poland can also be found in the report of the Association for Legal Intervention and the Konrad Adenauer Foundation titled “Employers and employment of foreigners.” The publication is available on the Association’s website www.interwencjaprawna.pl in the Publications tab.

Warsaw, July 20^th, 2018

THE UNION OF ENTREPRENEURS AND EMPLOYERS AGAINST THE LIQUIDATION
OF THE FLAT TAX RATE CONCERNING ECONOMIC ACTIVITY

Already mid-May this year, when the idea of liquidation of the flat tax for entrepreneurs and the actual introduction of the 3^rd tax threshold was publicly presented, the Union of Entrepreneurs and Employers expressed a very critical opinion on this issue, pointing, among others, to the fact that the tax will strike financially above all the still fledgling middle class. Today, we have a ready-made draft bill that must be judged even more harshly – it assumes increasing tax burdens not only for wealthier citizens, but for all those employed, thus contributing to the increase of the tax wedge in Poland.

The presented draft bill comprises of three key elements. First of all, the Solidarity Support Fund for Disabled People (Solidarnościowy Fundusz Wsparcia Osób Niepełnosprawnych) is to be created. It is virtually impossible not to notice that the legislator therefore decides to clone the State Fund for Rehabilitation of Disabled People (Państwowy Fundusz Rehabilitacji Osób Niepełnosprawnych – PFRON) – albeit under a different name. Even the activities, which the Fund’s resources will be allocated for, are alike – they concern, among other things, execution of “tasks in the field of social and vocational support for disabled people” (the PFRON Act includes the execution of tasks “in the field of occupational and social rehabilitation of disabled people carried out by foundations and non-governmental organizations”) or “programs co-financed from European Union funds for people disabled people” (PFRON Act: “programs planned for implementation in a given year, supported from European Union aid funds for people with disabilities”).

Thus, the authors of the draft bill propose to actually double an already existing institution. They do so in a situation in which the functioning of certain elements of the system built around PFRON requires far-reaching adjustments (e.g. the issue of “trading” on payment reductions, which the Union of Entrepreneurs and Employers ZPP already elaborated on in a separate document). It is necessary to point out at this point that there is a lack of systemic logic. When it is still necessary to reform the rules and regulations of operation of one fund, another one is established, designed for practically the very same purpose. We believe that from the point of view of the quality of state institutions, as well as the effectiveness of their activities, such fragmentation and duplication of entities do not serve any purpose, it is point-blank harmful – therefore, the legislator should refrain from doing so.

The real problem, which should be addressed with absolute certainty, appears, however, not at the stage of creating the new fund, but when the legislator describes the system of its financing. As far as taxes are concerned, namely a new tax threshold and liquidation of flat rate income tax for entrepreneurs – the arguments against this solution have already been stated. The introduction of this concept will be economically damaging, and it also stands in radical violation of election promises (government representatives would repeatedly state that they did not intend to introduce new taxes, and that they would be able to finance their social projects thanks to tightening the tax system and allocating resources more reasonably, not increasing fiscal burdens). What has been proposed in the draft bill is now way beyond this framework.

It is postulated that the resources of the Fund should come not only from revenue from the new tax –it is clearly stated in Art. 3 that the Fund’s revenues are “compulsory contributions to the Fund”. In accordance with Art. 4, persons subject to pension insurance (with exceptions listed in the draft bill) are compulsorily obliged to contribute. To put it in straightforward terms – the draft bill proposes to increase the compulsory taxation of all wages, at least from the minimum wage up (if the salary comes from different sources, then it is added up), with regard to people employed on the basis of any contract. In practice, this means that employees, who already earns net only slightly more than 50% of the expenses actually incurred by the employer, will receive even less. Even if they only earn the minimum wage. Socially, this is an extremely harmful idea.

The Union of Entrepreneurs and Employers has long indicated that one of the biggest problems of the tax system in Poland (and more broadly – the system of all public levies) is the fact that salaries and wages are drastically taxed, in particular the lowest ones. Even the proposal of a new tax system, developed by the circles close to ZPP, primarily assumed a radical reduction in labour taxation. People’s affluence and wealth come from natural resources, capital, and work. We are unable to change the state of having natural resources to a significant extent by means of peaceful methods, nor do we have accumulated capital, because throughout the last several centuries, we have only had short periods of independence and free entrepreneurship in Poland. The conclusion can only be one – if we want to catch up with more affluent countries, we must focus on work.

How is the work of Poles to generate wealth, since such a large part of its financial reward in the form of remuneration is simply taken away by the state? The proposal to increase the burden on remuneration is a curious oddity – the tax wedge in Poland is already at the level of the OECD average (and the organisation brings together highly developed countries whose citizens are in many cases much more affluent than Poles). Why does the government want the level of these burdens to further increase? Wages began to grow more dynamically (Central Statistical Office of Poland GUS figures speak for themselves), and another way (following the fuel fee) was found for Poles to benefit from the economic prosperity to a lesser extent than they could.

Apart from the issue of a fair and effective distribution of the tax burden, the next question is also relevant: to what extent will the new contribution additionally burden the remuneration of Poles? It is scandalous that there is nothing about this in the draft bill. According to Art. 4 sec. 2, the amount of the contribution to the Fund is specified in the budget act. Therefore, we are dealing here with an unprecedented situation – not only that the legislator postulates the introduction of an additional levy, they also do not specify its amount in the draft. Regulations in this form would mean that the government can manipulate the amount of the contribution year to year. It is a fatal proposal and one violating a number of constitutional principles.

Apart from the obvious issues, such as the principle of legal security or trust in the state, it is worth considering Art. 217 of the Polish Constitution and the principle of regulating public levies and their structural elements resulting from it exclusively and completely in an act. According to the jurisdiction of both the Supreme Court and the Constitutional Tribunal, it is clear from the provision of the Constitution that all the essential elements of the “tribute ratio” should be regulated directly in an act. This means that in relation to these “essential elements’ (which certainly include the tax rate or the amount of the premium), one cannot use delegation to issue a regulation. Is the legislator, while not wanting to determine the amount of the tax directly in the act, trying to find a way out of the situation, transferring the amount of the contribution to be paid to the budget act, and not a ministerial regulation?

It might seem at that time that the requirement to determine the essential elements of the tax ratio is respected; however, the budget act is of a special nature, and the mechanism proposed by the authors of the draft bill means the breakdown of the regulations of essential construction elements into two legal acts, one of which is additionally of rotating character. There is also no doubt that the intention expressed in the provision was that the legislator could not leave in the act regulating the tribute any “free room” to determine the rate or the object of taxation in a separate act, and this certainly will happen if the bill is adopted in the present form.

At the same time, one ought to make note of double (sic!) false narrative surrounding the project. On the occasion of presenting the tax concept, government representatives in an untrue way claimed that they were not raising taxes. The fact that this was a lie was already known back then. At the same time, however, it was being said – in an extremely populist tone – that additional support for disabled people with the help of a new tribute would only burden the “richest” of Poles. It can now be said that the public was then misled for the second time – the draft bill explicitly states that everyone should contribute to the new Fund, not only those whom the government considers to be “the wealthiest”.

To sum up, we consider the draft bill to be a terrible attempt to increase the fiscal burden on remuneration and income from economic activity in Poland, which is directly contrary to the economic interest of our country, as well as in contradiction with the announcements of the government. At the same time, we draw attention to the scandalous form of the regulation regarding contributions to the new Fund – one cannot accept a draft in which the amount thereof is not directly specified and which refers to the budget act. We postulate withdrawal from this harmful project and to start a proper debate: both concerning the rational support of people with disabilities and with regard to the construction of a fair and effective tax system in Poland.

The Union of Entrepreneurs and Employers

Warsaw, August 13^th, 2018

 

The Russian embargo does not work –we have alternative consumer markets.
Food exports are on the rise

 

The Polish trade balance after the introduction of the Russian embargo is systematically improving. The structure of exports has not changed; however, the volume of food products exported has increased. Poles were, therefore, successful in effectively finding alternative consumer markets.

The basic conclusion from the document published by the Union of Entrepreneurs and Employers ZPP is as follows: Polish exporters are doing very well and in spite of the embargo, they are gradually increasing the volume of exports, seeking new markets. What is important, the export of food products was not particularly affected by the embargo. It seems, however, that the main victims of the whole situation are primarily the Russians.

“Immediately after the embargo was introduced, we were being scared how terrible the consequences would be for Polish producers, in particular farmers were to await a catastrophe,” says ZPP President Cezary Kaźmierczak. “Meanwhile, it turned out that Russia is not an indispensable market for our exporters, and the embargo hits the Russians themselves, who now have to pay much more for food than before 2014.”

The fact that the embargo had no significant negative impact on the volume of Polish exports is best evidenced by hard data – in 2013, we exported goods worth approximately PLN 648 billion. In 2016, two years after the embargo was introduced, the value of exports increased to PLN 803 billion, that is circa 32% more compared to 2013. At the same time, the structure of exports did not significantly change, which means that the volume of sales abroad of Polish food products also increased.

“This clearly shows that the embargo did not lead to the collapse of Polish food exports. It also turns out that Russia is not at all a key market for Polish exporters, already in 2013 we were selling more to our small neighbour – the Czech Republic – than we were to Russia,” says Jakub Bińkowski, Secretary of the Department of Law and Legislation of the Union of Entrepreneurs and Employers ZPP.

Despite the fact that Poles managed to cope with the constraint introduced in 2014, or the fact that Russians complain about rising food prices, Vladimir Putin claims that he will keep the embargo in force for as long as possible. It seems that there are no rational premises for this – even the condition of the Russian food sector, which could theoretically be improved if the embargo were abolished, does not justify maintaining the embargo because of its increased share in satisfying internal food demand. A significant improvement can only be noted in the poultry and pork sector.

Finally, it seems that Russia, due to the instability of its economic situation, largely dependent on prices on the raw materials market, as well as the relative poverty of the majority of the population (especially in the oblasts far from Moscow), is not a very attractive market, therefore possible maintaining of the embargo should not pose any serious threat to Polish producers. Henceforth, the argument that the embargo was an exceptionally severe repercussion resulting from political and economic sanctions imposed by Russia, that should be eased – according to some – must be regarded as false.

***

Business Papers is a new format of documents prepared by the Union of Entrepreneurs and Employers ZPP – it consists in a synthetic presentation of the most important facts and data concerning the issue discussed, in a graphically attractive form. Thus, the readers can quickly learn key figures, statistics, and news on the subject of their interest.

13^th August 2018 Russian embargo vs. Polish exports (in Polish) 


fot. Tim Mossholder / Unsplash