Brussels, 5^th June 2018

 

Transit and international transport are removed from the posting of workers directive (PWD) – Members of the European Parliament Committee on Transport (TRAN) voted on June 4^th on three reports from the Mobility Package

Subject to the of the vote of the Transport Committee (TRAN) were three reports by MEPs Wim Van de Camp, Merja Kyllönen and Ismail Ertug regarding the market and social aspects of the Mobility Package – drivers’ working time, transport posting, and market access.

For Polish carriers, the most important part of the vote was the compromise amendment 6 on the exclusion of international transport operations from the PWD. A compromise on cabotage which extends the duration of cabotage operations from 5 days (proposed by the European Commission) to 7 days was also adopted.

The TRAN Committee adopted the report excluding international transport and transit by a 27 to 21 vote during yesterday’s session.

“The result of voting in the TRAN Committee is good news for the transport industry from all member states of the European Union, and a balanced compromise taking into account the needs of both drivers and carriers as well as organisations supervising them,” comments Agata Boutanos from the Brussels office of the Union of Entrepreneurs and Employers ZPP.

In the next steps, we should prepare ourselves for the plenary vote in the European Parliament, as well as come to an agreement within the Trilogues as soon as there is an unequivocal position from the EU Council.

Yesterday’s favourable vote in TRAN will help avoid the adoption of the revision of the posting of workers directive voted on last week in transport. The implementation of the posting of workers directive in relation to transport would translate into unprecedented and unjustified administrative burdens for carriers and the entire logistics industry. The result thereof would paradoxically not lead to improved employment conditions for employees, but to closing down of micro, as well as small and medium-sized enterprises, which would not be able to meet administrative requirements. The transport prices of all goods throughout Europe would also increase significantly.

Warsaw, 18th May, 2018

 

COMMENTARY OF THE UNION OF ENTREPRENEURS AND EMPLOYERS ON REGULATORY PROPOSALS HOW TO REMEDY THE PROBLEM OF PAYMENT BLOCKAGES

 

Delayed payments between entrepreneurs are one of the most serious economic problems in Poland. Our country is not, of course, the only one suffering from this issue – no member state of the European Union has developed a fully effective solution, and payment blockages constitute a major problem also abroad. Research shows that more than 80% of entrepreneurs have come across delayed payments in Poland. One must bear in mind that the group of entities for which payment blockages are a particularly dangerous phenomenon are entrepreneurs from the SME sector. The reasons are twofold. First of all, as a rule, it is them – as subcontractors, alternatively simply smaller contractors – that have to wait for payments for services rendered or products sold for an absurdly long period of time. Secondly, the effects of untimely payments from invoices issued are much more severe for them than for large entities. Payment blockages make it very difficult for them to continuously plan their finances, have a negative impact on their liquidity, and – in extreme cases – may lead to bankruptcy.

Taking the above-mentioned facts into account, we take the position that there are two dimensions to the problem with payment blockages. The first one is a problem taking place already at the contracting stage when, at the time of signing the contract, the smaller contractor is de facto forced to accept and extended the invoice payment period. Due to the large difference in counterparty strength, as well as their scale of operation and market position, small companies accept unfavourable contractual provisions. The second dimension manifests itself after the service has been completed or the goods delivered, when the payment is made within a longer period than is required by the contract. In this case, entrepreneurs from the SME sector are in a much worse position than their larger business partners. As research indicates, they do not exercise their rights granted in the “Act on payment periods in commercial transactions” to charge interest or to demand a flat-rate compensation for the costs of recovering a claim in the amount of EUR 40. Sometimes this is a consequence of ignorance, but often it is out of fear of losing a contractor. One must remember that the companies in question are often small subcontractors or suppliers working for large networks.

First of all, in order to effectively fight against the phenomenon of trade credit extortion on small companies, it is necessary to take into account in the proposed regulations that small entrepreneurs, due to their incomparably weaker position on the market, will not usually be willing to use the tools available to them to collect their debts on time, or debts increased by interest and additional fees.

The proposal presented by the Ministry to solve the problem of payment blockages by means of specific tax sanctions (increasing the debtor’s tax base by the amount of debt resulting from late payments, and likewise lowering the creditor’s tax base by this amount) we consider noteworthy and fair in its essence. It should be remembered, however, that it would only partially solve the problem associated with not being paid on time, which often leads to financial liquidity-related problems for the company. Tax tools can be useful in the fight against payment blockages, but it is doubtful whether they alone will constitute an effective enough solution.

In connection with the statement above, we would like to propose a directional bi-module solution, which in our opinion may indeed lead to a significant reduction in payment blockages. As part of the proposed regulations, we would address both of the aforementioned issues related to the problem of late payments. At the same time, we would like to point out that these are prototype proposals that will certainly require further refinement and clarification in the course of potential legislative works.

We propose that the catalogue of acts of unfair competition be supplemented with the use of market position in order to force suppliers or service providers to accept grossly long payment deadlines. Such action should be subject to a fine. The issue of precise naming of this act is also discussed, as well as its premises (one can assume that a deadline exceeding 60 days could be recognised as a grossly long period, and that the disproportion in the size of contracting companies could be a premise of market position abuse, as well as the regular nature of contractual infringement). At the same time, we must remember not to interfere too much with the freedom to conclude contracts, while designing solutions in this area, as it is an absolute fundament of the free market economy.

Regarding late payments, we suggest two-way actions. First of all, following the British model, we postulate the introduction of mandatory reporting to the President of the Office of Competition and Consumer Protection of data and information on payments made by large entities. The issue of the frequency of such reporting remains a matter of debate – it seems that taking into account both the necessity of effectiveness of the proposed solution and the principle of proportionality in imposing new obligations on companies, it would be optimal to submit a similar report every quarter. In the report, large entities would have to clearly indicate in a separate section the amount of late payments (both aggregated and divided into individual transactions), the payment deadlines specified by contracts, the invoice issue dates, as well as the data of contractors whom they owe money. The Office could use this data, for instance, to create annual statements that reliably regulate the liabilities of contractors. The introduction of the reporting obligation would also allow for a deeper understanding of the problem of payment blockages and for the identification of industries in which this problem is particularly severe.

In connection with the introduction of the above-described solution, it would be possible to grant the President of the Office of Competition and Consumer Protection the right to put forward a motion to initiate enforcement proceedings. The President, acting in the interest of and for the benefit of the creditor, would request the enforcement of amounts increased by both the interest resulting from the Act and a flat rate compensation of 40 euros, as well as enforcement costs. This way, the risk of losing a contractor would be removed from micro, small and medium-sized enterprises (because the enforcement of receivables increased by interest and compensation would not result from activities undertaken by them). At the same time, large entities in the face of the need to pay the amount resulting from the invoice, plus interest, compensation and enforcement costs, would be much more willing to pay invoices on time. Of course, due to the calibre of this tool, the said power should be vested in the President only in special situations, i.e. in the case of gross delays in payment (the premises should be specified in a potential legal act; one can assume that a delay exceeding by 30 days as per contract might be considered a gross delay, or no special circumstances justifying the delay in payment). Moreover, before the motion would be submitted, the President should send the debtor a pre-trial request to pay the designated amount to the creditor. The aim of such a solution would be to limit the number of initiated proceedings (we assume that a large part of debtors would decide to pay the debt voluntarily after receiving such a summons), which would have a positive impact on their duration.

Implementation of the above-described regulations would de facto mean transferring the issue of limiting payment blockages to the competence of the President of the Office of Competition and Consumer Protection. This seems to be a reasonable solution – the President is a body of the central government administration competent in matters of competition and consumer protection, i.e. its activities include actions aimed at combating practices restricting competition. According to Art. 31 item 3 of the “Act on competition and consumer protection”, the scope of the President’s activities also includes conducting research on market behaviour of entrepreneurs. As payment blockages often cause that entrepreneurs are less willing to invest and therefore do not develop, there is no doubt that delayed payments have a significant negative impact on competition. We are dealing with a situation in which some entities, not through fault of their own, are temporarily deprived of funds due to late payments and unsettled invoices. As the problem of payment blockages also impacts industries affected by the grey zone, late payments often aggravate the competitive position of entities honestly accounting for all public-law obligations. Subsequently, transferring the issue of researching and counteracting the problem of payment blockages to the President of the Office of Competition and Consumer Protection seems to be justified and advisable.

Apart from the above-mentioned activities, we would like to propose a number of complementary activities. Above all, we advocate that the legislator refrain from taking actions that legally limit the possibility of using the methods of managing receivables that are conducive to maintaining the financial liquidity of a given entity. A prominent example are public hospital suppliers who pursuant to Art. 54 sec. 5 of the “Act on medical activities” are de facto deprived of the possibility of selling their claims against the hospital (consent must be expressed by the creating entity – the law does not specify the mode thereof, nor is there an appeals procedure). We therefore propose to repeal this harmful provision and refrain from proceeding with changes that may further restrict the use of tools such as, for instance, factoring. In addition, we propose some interference in the principle of freedom of contracting (important especially in economic relations), namely the recognition of a contractual ban on the transfer of rights to receivables as a prohibited clause. Due to a number of undesirable phenomena taking place in the economy, one can imagine the creation of a whole catalogue of abusive clauses relating precisely to business-to-business relations, and not only, as it presently is, to business-to-consumer relations. Among such clauses one could distinguish, among other things, the prohibition of transfer of rights. Other proposals of abusive clauses in business should be developed in the course of cooperation between entrepreneurs and the legislator. The aim of these actions would be to limit the phenomenon of abuse of the contractual advantage of large entities, which is manifested not only by extended payment periods. As of now, the “Act on counteracting unfair use of contractual advantage” is in force, but it only applies to trade in agricultural and food products. It would be worth solving the problem on the scale of the whole economy, and due to the limited resources available to the Office of Competition and Consumer Protection, it seems to be a good solution to create a catalogue of abusive clauses in business.

Regardless of the recommendations listed above, we point to the judiciary as a key element in counteracting market pathologies. Only in a situation in which the proceedings in the economic case will last for a reasonable time, it will be possible to independently enforce the claims by the interested entities. For this reason, the Union of Entrepreneurs and Employers has for a long time postulated a simplification of judicial procedures in commercial cases, especially the smallest ones. If the value of the dispute does not exceed tens of thousands of zlotys and the parties involved are entrepreneurs, the proceedings should be carried out in a maximally simplified and informal manner, while maintaining the highest possible procedural economy. We also postulate the introduction of the principle of the trial hearing day by day.

We hope that the proposals presented will be of interest to representatives of the Ministry of Entrepreneurship and Technology. We are well aware of their draft character and that it would be necessary to thoroughly discuss them in detail. We believe, however, that they provide an adequate response to the challenge of payment blockages gnawing at Polish economy.

Warsaw, 21st May, 2018

 

The Public Health Forum of the Union of Entrepreneurs and Employers calls for the creation
of a framework within Polish regulations for the use of solutions in the field of telemedicine,
including teleradiology

The world is changing and so are our lifestyles which means that today’s society is exposed to a much greater extent to the so-called diseases of affluence. Their early detection is enabled, among other things, by modern diagnostic imaging. In Poland, there is a sufficient number of diagnostic apparatuses available and the available research indicates that the possibilities of this equipment are much greater than is their actual use. The reason for this situation are, first of all, the regulations in force imposing an obligation on physicians to directly supervise the course of the examination at an institution. The Public Health Forum of the Union of Entrepreneurs and Employers is in favour of creating a framework in Polish law for the use of telemedicine solutions, including teleradiology.

The introduction of teleradiology to the Polish healthcare system will enable patients to have specialist examinations performed under remote supervision of a physician, who would not be able to reach them under traditional circumstances. This in turn will translate positively into an increase in tests executed and a decrease of people waiting for their turn to be examined.

The dissemination of teleradiology as a form of medical services requires detailed legal changes – appropriate proposals were drafted by the Public Health Forum.

“We are convinced that the dissemination of telemedicine in general, including teleradiology, is in the best interests of patients,” says Marcin Nowacki, Vice-President of the Union of Entrepreneurs and Employers. “At the same time, it is a process that requires some involvement on the part of the legislator and amendments in a number of legal acts. We have prepared several concrete proposals of changes and we hope that they will be met with understanding and interest among key decision makers.”

The basic conditions for the provision of guaranteed services in the field of outpatient specialist care are described in the Regulation of the Ministry of Health dated November 6^th, 2013. Unfortunately, in this act, with regard to computer tomography and magnetic resonance, there is no mention of teleradiology. The Union’s Public Health Forum postulates that conditions for execution of services be supplemented in the scope of personnel – there should be an alternative for a specialist physician performing radiological patient supervision in the form of remote supervision over the examination.

At the same time, the Act of November 29^th, 2000, known as the Atomic Law, which does not explicitly describe teleradiology and radiological supervision, also requires an amendment. The Public Health Forum postulates to introduce to the Act a special power for the Minister of Health to specify, by regulation, the requirements and detailed rules for the implementation of a patient supervision system in X-ray diagnostics, in particular the separation of remote radiological supervision from direct supervision of the patient.

The Regulation of the Minister of Health of February 18^th, 2011, on the conditions of safe use of ionizing radiation for all types of medical exposure also needs to be amended. The Union’s Public Health Forum calls for a broader definition of teleradiology, as well as for setting minimum organisational conditions during the implementation of the service in a remote form. In the opinion of experts of the Public Health Forum, a definition of radiological supervision should also be added, which could be provided for both in person and remotely. It would also be necessary to consider the possibility of remote description of a medical examination.

“The implementation of the amendments that we are proposing will enable the commencement of services within the scope of teleradiology, which will constitute great progress for both medical institutions and patients,” says Marcin Nowacki representing the Union.

We invite you to watch the video prepared as part of the Public Health Forum of the Union of Entrepreneurs and Employers “Telemedicine in Radiology”.

 

Photo. Jamison McAndie / for lic. Unsplash

Warsaw, May 17^th, 2018

Dispute about 1% of pharmacies in a voivodeship ends. The SAC on the side of patients and entrepreneurs

 

A written justification of the key and precedent judgment of the Supreme Administrative Court regarding the provisions on 1% of pharmacies in a voivodship has been published. The SAC confirmed that the principle of universal succession apply to licences for running pharmacies, and pharmacy licenses acquired through capital acquisitions by law are transferred to the purchaser. Thus, the Court confirmed the rights of entrepreneurs who in the last dozen or so years had been buying pharmacies, also from the State Treasury. The verdict undermines the interpretation pushed by the pharmaceutical inspection and the pharmaceutical corporation, which in recent years took action against entrepreneurs, trying to change the meaning of the provisions on 1%, after more than a decade of their validity, without changing their wording by the parliament.

The judgment of the Supreme Administrative Court of February 27^th, 2018 in the case of II GSK 2510/17 is a breakthrough, as it ends the interpretive chaos around the principle of universal succession concerning licences to operate a pharmacy.

In 2004, the legislator introduced to Art. 99 sec. 3 of the Pharmaceutical Law, the provision according to which the licence to operate a pharmacy “is not issued if the entity applying for the licence runs in a given voivodeship more than 1% of generally accessible pharmacies”. For more than a decade, it was consistently assumed that the ‘one percent rule’ applies, as is clear from the quoted provision, only in cases where the entrepreneur requests a new licence to run a pharmacy. It does not mean, however, a general ban on having more than 1% of pharmacies, for example, through capital acquisitions.

For ten years, many state institutions in official documents stated that there is no ban on having more than 1% pharmacies in a voivodeship. These included, among others, the Ministry of Health, the President of the Office of Competition and Consumer Protection, and the Ministry of Treasury, which on the basis of the aforementioned provisions sold state-owned Cefarm pharmacies and their pharmacy chains to entrepreneurs for over PLN 0.5 billion.

Furthermore, there were two draft bills discussed with the intent to introduce such a ban (the ban eventually did not come into force). In the justifications of those amendments, it was clearly indicated that the then (and current) provision applies only to the stage of licence issuing.

Suddenly, at the end of 2014, the pharmaceutical inspection, under the pressure of the authorities of the pharmacy self-government, concluded that the phrasing “is not issued if” translates into an absolute ban on anyone having more than 1% of pharmacies in a voivodeship. As a result, an administrative procedure was commenced to challenge and withdraw existing licences, including the procedure to refuse licence changes in the case of capital mergers.

In the case covered by the decision of the Supreme Administrative Court, the entrepreneur, after the acquisition of another company, applied to the Chief Pharmaceutical Inspectorate for a change in the licence to run a pharmacy. The entrepreneur referred to the principle of universal succession, provided for in Art. 494 par. 2 of the Commercial Companies Code, according to which the acquiring company enters into the entire rights and obligations of the acquired company on the merger date. The CPI refused to change the licence to operate a pharmacy, claiming that the entrepreneur exceeded the permissible threshold of 1% of pharmacies owned in a voivodeship. The CPI further stated that in such a situation Art. 99 sec. 3 of Pharmaceutical Law applies. In its opinion, this article is an exception to the principle of universal succession specified in the Commercial Companies Code, and thus the licence was not transferred to the entrepreneur.

The Voivodeship Administrative Court did not agree with the arguments put forward by the Chief Pharmaceutical Inspectorate that were supported by the Chamber of Pharmacists, indicating that the succession took in fact place and Art. 99 sec. 3 of Pharmaceutical Law had no impact upon it. In the judgment under review, the Supreme Administrative Court unanimously confirmed the VAC’s argumentation. The judgement states as follows: “The Supreme Administrative Court rules that the interpretation of the provisions of Art. 494 § 2 of the Commercial Companies Code and Art. 99 sec. 3 of Pharmaceutical Law do not allow to accept that the second of the referred provisions is a provision referred to in Art. 494 § 2 C.C.C., i.e. a provision stating that the acquiring company is not allowed to operate a pharmacy. The provision of Art. 99 sec. 3 P.L. determines situations in which no licence to operate a pharmacy is granted, but in no way refers to the situation of a licence transfer in the event of a takeover of a company”.

The justification in ink is the more important, as the court battle for the defence of pharmacies abounded in much manipulation on the part of the supporters of closing down pharmacies. Hopes arise that such an unambiguous ruling of the case by the Supreme Administrative Court will prevent further attempts to misinterpret the ‘one percent rule’. The more so, because the court clearly ruled that the licence to operate a pharmacy passes to the acquirer of the pharmacy by law (ex lege) without the need to issue any administrative decision, and the provisions concerning 1% of pharmacies in a voivodeship by virtue of Art. 99 sec. 3 of Pharmaceutical Law do not apply. In the ruling, it was stated: “The aforementioned provision does not provide any basis for examining these premises in a situation when the transfer of a licence is based on Art. 494 § 2 of the Commercial Companies Code, when the acquiring company acquires the permit by law without the need and the possibility to issue a decision in this matter”. The court suggested that the formal confirmation of the transfer of a license take place through material and technical activities, which the body is obliged to perform, without examining the substance of the case.

The ruling of the Supreme Administrative Court introduces an understandable interpretation of pharmaceutical law provisions referring to the classic rules for the interpretation of the law and the actual wording of the provisions. The attempts by the Chief Pharmaceutical Inspectorate to create artificial rules regarding the succession of licences were thus suppressed.

Warsaw, May 9^th, 2018

 

 

POSITION OF THE UNION OF ENTREPRENEURS AND EMPLOYERS
ON THE SUPPLEMENTARY PROTECTION CERTIFICATE FOR MEDICINAL PRODUCTS

 

Beginning with Council Regulation (EEC) No 1768/92 of June 18^th, 1992, followed by Regulation (EC) No 469/2009 of the European Parliament and of the Council of May 6^th, 2009, concerning supplementary protection certificates for medicinal products, the EU legislator introduced into the legal order an instrument to extend the protection of medicinal products beyond the duration of basic patent protection. In accordance with Article 2 of this Regulation, any medicinal product protected by a patent within the territory of a EU Member State and before being launched on the market may be the subject of a supplementary protection certificate. The terms and conditions for obtaining such a certificate are described in Article 3: the product must be protected by a basic patent remaining in force, admitted to be traded on the basis of a valid permit, which must be the first authorisation for the product to be placed on the market as a medicinal product, and additionally the product could not be the subject of a certificate in the past. Under Article 5 of this Regulation, the certificate confers the same rights as are granted under the basic patent. The design thereof is such that the supplementary protection certificate is in a sense an extension of the patent. Ultimately, the medicinal product is thus protected for 20 years by a patent and then, for a maximum of 5 years, by the said certificate.

 

The state of affairs described above, means in practice that even for 25 years after obtaining the patent protection of a given drug, it is impossible to produce generic and biosimilar drugs based on it in the European Union. SPC prevents the production of generic and biosimilar drugs even for the markets of countries outside the European Union, in which the regulation does not apply. The result is easy to predict. Manufacturers of medicines from countries such as India and China, immediately after the expiry of patent protection, begin the production of generic and biosimilar drugs, and sell them to non-European markets. From the point of view of a multinational corporation, SPC is not a huge problem, because such a corporation can always open production outside of Europe.

 

The supplementary protection certificate is an important development barrier, especially for smaller pharmaceutical companies. Compared with their competitors from other continents, as well as with huge, international corporations that benefit, among others, from the economies of scale and because of their huge revenues also possess significant staff resources, smaller entities do not have too many advantages on their side. The current shape of SPC regulations only deepens this disproportion. In a situation in which entrepreneurs from Asian countries, or the afore-mentioned global corporations, start production of generics and biosimilars shortly after the expiry of patent protection, smaller enterprises operating in the European Union de facto have their hands tied. Not only individual EU Member States lose out on this solution (the competitiveness of their pharmaceutical industry is diminished), but so does the economy of the European Union understood as the sum of the potentials of the economies of individual EU Member States.

 

In connection with the above conclusions, it seems reasonable to present a legislative proposal that would maintain the basic value resulting from the supplementary protection certificate, i.e. the extension of up to five years of the protection of a medicinal product on the market of the European Union, while allowing European entities to compete with other companies on the markets of third party countries. Strengthening the position of European drug manufacturers is particularly important in the context of the added value that this industry provides to individual economies. One must keep in mind that pharmacy and biotechnology are one of the fastest growing industry branches, and one can assume that their importance will only grow in the decades to come. For this reason then, the dynamic development of this industry should be of particular interest to decision-makers in EU Member States, as well as the whole Union as such, which as a Community will have to compete with other huge markets.

 

Therefore, it is proposed to introduce the SPC MW mechanism (SPC Manufacturing Waiver), which would enable the production of medicines in Europe (while SPC protection is in force) for export only to third party markets where protection under SPC does not apply. This way, the primary objective of the supplementary protection certificate will be maintained – the mechanism will not infringe intellectual property rights or the essence of SPC regulations, at the same time allowing smaller European entities to produce medicines for third party markets, while protecting them with additional certificates. It seems that this proposal would set the optimal shape of the regulations in question and would constitute a sensible compromise between taking into account the interests of those interested in prolonged protection of intellectual property and the needs resulting from the necessity to increase the competitiveness of European enterprises. Introducing the postulate into the legal order would require the European Commission to take a legislative initiative, i.e. to submit a draft of an amendment to the regulations both to the Council of the European Union and the European Parliament. We hope that our arguments will be taken into due consideration by key decision makers and that such a project will be put forward to the above-mentioned EU bodies in an appropriately short period of time.

 

At this very moment, timing is important. Therefore, it is of such paramount importance that the European Commission put forward a legislative proposal in the current term, which ends in 2019.

Warsaw, 18th April 2018 

 

POSITION OF THE UNION OF ENTREPRENEURS AND EMPLOYERS ON “MORAWIECKI’S FIVE”

 

On April 14^th, 2018, the Law and Justice program convention was held, during which Prime Minister Mateusz Morawiecki announced a number of activities, important from the socio-economic point of view. These promises were collectively named “Morawiecki’s Five” and from the perspective of micro, small and medium-sized enterprises, three of the proposed changes are of key importance: lowering the CIT rate for small taxpayers, lowering social security contributions for small businesses and supporting construction of local roads infrastructure. The Union of Entrepreneurs and Employers positively assesses the proposals presented during the convention.

The Prime Minister proposed lowering the CIT rate for small taxpayers by as much as 6%. It must be remembered that the basic rate is 19%, and since January 1^st, 2017, a taxpayer starting his business, or one whose sales revenues did not exceed EUR 1.2 million in the previous year pays tax at a reduced rate of 15%. According to the proposal, the rate would be further reduced – to the level of 9%.

It is worth noting that there is no lower CIT tax rate anywhere in the European Union. Already with the previous reduction, we indicated that small business functions in Poland in general in the form of ordinary economic activities of natural persons – there are almost 3 million of them, while CIT taxpayers are less than half a million. Entrepreneurs therefore usually pay personal income tax, not corporate income tax. At the same time, we consider the current state of affairs to be disordered and generally inappropriate. We take the position that the economic activity of natural persons, due to their specificity, should in principle be a form reserved for persons performing activities for the maintenance of themselves and their families.

In our understanding, this is a kind of a substitute for a full-time job and a formula that should be used by small craftsmen, professionals, owners of small service establishments and small shops. However, it is not a desirable situation in which people running a business for profit, multiplying assets, employing many people, and aiming to develop their business, run it in the form of a sole proprietorship. Due to the security of economic turnover, as well as the possibilities resulting from the selection of such a form of running a business, we believe that such entrepreneurs should, in principle, set up commercial law companies. Some of them could choose, of course, partnerships, which are not taxpayers by themselves (income of partners are taxed), but due to the protection of personal property, a very advantageous formula seems to be even a limited liability company that is already a CIT taxpayer.

Some would probably take advantage of the interesting opportunity to set up a limited joint-stock partnership, which also nowadays is subject to this tax. It is possible that in the future, income from limited partnerships will also be CIT-taxed. Looking at the issue from this perspective, lowering the CIT rate for small taxpayers is interpreted as an incentive for entrepreneurs to choose precisely these forms of running a business – we recognise this direction of change as the right one, nevertheless, it seems that lowering the rate is not enough.

An important obstacle, which discourages many entrepreneurs from establishing companies, is the level of complexity of regulations and the multitude of formal obligations that are associated with this process. Enough to say that nowadays registration of a company in the Central Registration and Information on Business CEIDG is completely smooth and quick, while registration of a new entity in the National Court Register may extend up to 6 months (there are known cases of rejection due to the entry in the application form “city of Warsaw” instead of the proper “capital city of Warsaw”, which resulted in the need to re-submit the application and wait for a second quarter to register said entity).

For this very reason, we call for the creation of a truly separate and significantly simplified legal regime for micro, small and medium-sized enterprises – including those operating as commercial law companies. Lowering tax rates is definitely a step in the right direction, however insufficient – in day to day operations, entrepreneurs are mainly bothered by protracted procedures, excessive formalism, and an excess of duties. The promise of such a change was lacking in the Prime Minister’s speech, which is why we are appealing for it in this document.

Another important element of the PM’s speech was the promise of introducing reduced social security contributions for small business operations (from which revenues do not exceed two and a half times the minimum remuneration for work). The project called “small business – small Polish Social Insurance Institution ZUS” is not a novelty and had already appeared before in the announcements of both the Prime Minister and other politicians, including the minister of entrepreneurship and technology Jadwiga Emilewicz.

Above all, one ought to praise the Prime Minister’s persistence in the fight for this idea – prolonged works concerning this issue clearly show that in the government, as well as in discussions with state institutions, there is considerable resistance to implementing this solution. The fact that after such a long time the PM still maintains his desire to move away from the dogmatic so-called lump sum social security contributions, independent of the revenues earned, definitely deserves to be appreciated.

The data we have at our disposal suggest that at least 800,000 entrepreneurs in Poland would benefit from the discussed solution – it seems that this is a very important group, both in the sense of an “economic anthill” and in the sense of potential electorate that should be taken care of. Any and all arguments against reduced social security contributions with very small incomes are devoid of reason, and this is best demonstrated by the fact that they change regularly. At first, it was claimed that lower contributions would mean lower revenue to the Social Insurance Institution and, consequently, deterioration of its financial situation – it soon turned out that a large part of entities potentially interested in this solution, at the moment do not pay any premiums, because it would make their activities completely unprofitable.

And now we often hear that companies should grow – micro should become small, small should become medium, and medium should become large. We shall bear in mind, however, that in this case (it is worth recalling – we are talking about companies achieving monthly income not exceeding two and a half times the minimum wage), there is no question of activities conducted for profit and with the intention of significant development. This solution is to serve people who are self-employed and for whom it is a substitute for full-time employment – they do small services to earn a living for their households.

Claims that they should strive for regular growth and increased employment, sound bizarre – hairdressers, plumbers, or people giving private lessons simply want the state not to “rip the off” of a large part of their revenues as it presently does, rather than plan to establish international hairdressing or plumbing corporations. Therefore, we should allow those who want to develop, grow, and multiply their assets, do just that and create the best conditions for them, and those who do business, because they have to do it to earn a living, we should ensure them that after paying all public levies, they will have enough money to make their business profitable.

For this reason, once again, we express our warm support for the concept of small business. We call for, however, a return to the source and the original concept – one levy of about 20%, including income tax, social security contributions, and health insurance premium, with a flat rate. This way, the scale of the burdens of the smallest companies will indeed be directly proportional to the revenue achieved. Nonetheless, worrying are the recent reports that small businesses will become a de facto extension of the “runway” for companies that the government has already implemented under the Constitution for Business. The idea that the minimum premium would be exactly the same as the preferential premiums for an entrepreneur for two years after the end of the half-year period without any taxes, is inconsistent with the basic assumptions underlying the proposed solution.

Entrepreneurs have heard for many months that the amount of premiums will be proportional to their income – if ultimately the project of a small business is to take the shape we can read about in recent reports, they will feel cheated and rightly so. Therefore, thanking again for their stubbornness in firmly presenting this issue in the framework of political debate, we call for return to original solutions – a lot simpler and very beneficial for entrepreneurs.

In the end, the third proposal important for business is the concept of establishing a new local road construction fund with at least PLN 5 billion allocated in it. It is said for a good reason that the road system is the “blood circulation of an economy”. Adequate infrastructure is essential for the safe transport of goods or for transporting employees. Local roads (i.e. poviat and communal roads) constitute 88% of all public roads in Poland. We do appreciate the significant improvement in the area of national roads, but the actual condition of the infrastructure can be assessed only by looking at the local road network. And their quality, despite the programs carried out in previous years (the famous “schetynówki”), is still very bad. This was noticed by the Supreme Audit Office and described in its report that not only the local road network is poorly developed, but it is also of low quality. For this reason, it was recommended to introduce a special financial system for at least a dozen or so years of to support the maintenance of local roads from the state budget. We express deep hope that the program proposed by Prime Minister will provide an adequate response to the threats resulting from poorly developed and poor quality of local road network. The new fund should significantly contribute to the increase of road safety as well as to the improvement of the conditions for running a business, because in many places in Poland at this moment, infrastructure deficiencies constitute the biggest barrier.

All discussed points from the speech of Prime Minister Mateusz Morawiecki are very important for entrepreneurs from the SME sector. As indicated at the beginning – the Union of Entrepreneurs and Employers positively assesses these proposals. We do not oppose radically broad social programs, and some of them – such as “500+” – we support and recognise as necessary, but we must not forget that only a relatively prosperous state with a stable budgetary situation can afford to undertake them. These two conditions will exist only with efficient economic growth, which in turn only exists in a good climate for business. Therefore, we consider the proposed changes to be beneficial and we support them, although we appeal to go further than it would appear from the words of Prime Minister. As we often write in our studies – Poland cannot afford to be just “average”. We should strive for the best possible solutions and not resort to half measures. In addition to the reduced CIT rate for small taxpayers, we should therefore simplify regulations and streamline procedures for small companies. Small business activity is the best solution, but it should be close to the original concept – one simple, low tax directly proportional to income. We hope that our recommendations will be taken by key policy makers into consideration.

 

Union of Entrepreneurs and Employers

 

Fot. Ravi Roshan / na lic. Unsplash

Warsaw, 18th of April 2018

Position of the Union of Entrepreneurs and Employers on state policy regarding
information on new nicotine products

The state’s concern for the health of its citizens should, if possible, take into account the impact of the actions undertaken on the economic situation and the development of entrepreneurship. And in particular if it can bring positive effects, both from a medical and an economic point of view. Therefore, the Union of Entrepreneurs and Employers ZPP appeals to repeal legislation prohibiting communication of the results of scientific research on e-cigarettes and HNB products (heat-not-burn, heated tobacco) as quickly as possible.

The state, as a body financing health care, for understandable reasons wants to run an active and consistent smoke-free policy and should do so. However, it must not take on an irrational character, where under the slogan of the fight against cigarettes, provisions of the law are introduced that hinder the effective fight against addiction to traditional cigarettes. The primary goal of the state should therefore be to care for public health and not to fight an industry, regardless of whether it offers traditional cigarettes or alternative nicotine products. We consider the prohibition of communicating the results of scientific research to be purely repressive and irrational.

Electronic cigarettes and HNB products (heat-not-burn, heated tobacco) available for several years in Poland, although they are not fully health-neutral, reduce the risk of disease compared to traditional tobacco products. All allow the delivery of nicotine, but without tar, carbon monoxide and other harmful substances found in the smoke, responsible for a number of diseases. The aforementioned scientific studies indicate that new nicotine products are up to several times less harmful than traditional products. Based on this research, British and American authorities are willing to revise their own policies in this area. These products may therefore have significant potential in reducing the harmfulness of nicotine products.

Regardless of health aspects, one cannot be indifferent to economic issues. Tobacco companies in Poland as one of the more significant producers in Europe, naturally have a chance to be an important research and production base for a new generation of products. The tobacco industry provides about 8% of domestic tax revenues (i.e. approximately PLN 23 billion annually) and employs over 60,000 people. The revenue from the export of traditional tobacco products produced in Poland amount to over PLN 8 billion. It should be expected, however, that in the long-term perspective and taking into account the progress of tobacco control regulations, the demand for such products will shrink rapidly, which may have negative economic consequences for industrial companies operating in our country. The solution is to effectively use the potential of our tobacco industry for new, innovative and safer products that will gradually conquer global markets.

We advocate for a change in the current approach of the Ministry of Health in this matter, which not only does not allow the achievement of the assumed regulatory objective (i.e. public health protection), but has exactly the opposite effect, limiting consumers’ access to less harmful products. Amendments in the law which will focus on the protection of public health and take into account the freedom of doing business are the changes we need.

Considering both public health and economic development, regulatory solutions are necessary that would allow manufacturers and sellers to inform smokers (consumers of traditional cigarettes) about the health benefits of using products with potentially less harmful effects.


Union of Entrepreneurs and Employers

Photo. Vaping360 / Creative Commons licence / flickr.com

12.04.2018

 

Ambassadors of EU Member States have accepted the compromise text of the revision of the Posting of Workers Directive 96/71 / EC (PWD) negotiated with the European Parliament.

The revised text of the PWD directive was agreed upon and accepted by the Committee of Permanent Representatives on April 11^th. Afterwards, the draft will be sent to the European Parliament for the final adoption – voting in the Employment Committee is possible still in April, the adoption is presumed to take place on June 21^st.

Works on the revision of the directive lasted over two years from the moment of presentation of a draft by the European Commission (EC) regarding the shape of the directive amendment in March 2016 – 10 years from the adoption of the directive. The revision of the directive is one of the elements of the implementation of the European Commission’s demands to strive to equalise the remuneration of employees performing the same work in the Community – “Equal pay for equal work” repeated numerous times by the President of the European Commission Jean Claude Juncker in his “ State of the Union” addresses, as well as by Commissioners Marianne Thyssen and Violeta Bulc.

The Union of Entrepreneurs and Employers (ZPP) joined the European discussion on the posting of workers in September 2017 presenting its position and potential consequences of the introduction of proposed provisions for the functioning of small and medium-sized enterprises along with organisations from 16 countries. During more than 60 meetings with the European Commission, Members of the European Parliament as well as other European sectoral organisations, employers as well as small and medium-sized enterprises, the UEE promoted the postulates of Polish entrepreneurs pointing to the impact of provisions on the functioning of, among others, the European common market.

“We had the pleasure to work in Brussels with think tanks – Bruegel, Globsec and ECIPE – communicating the economic potential consequences of those regulations, as well as with expert organisations such as the Labour Mobility Initiative. We participated in meetings, prepared materials, including brochures explaining the consequences of the regulations’ implementation. We promoted them during meetings and events in the European Parliament in Brussels and Strasbourg,” says Agata Boutanos, Director of the Representation Office of the Union of Entrepreneurs and Employers in Brussels, and added, “The event on October 21^st organised jointly in the European Parliament by Professor Zdzisław Krasnodębski and the Union on Delegating Workers and the Mobility Package was also the beginning of our cooperation with transport organisations on regarding the posting of workers in the sector – a debate that is still ongoing.”

The revision of the 1996 directive introduces the concept of long-term delegation, which means that after 12 or 18 (in case of consent for a 6-month-long-extension) months, the employee will be delegated in the long term and will be subject to virtually all labour law regulations in force in the host country.

Temporary work agencies are to guarantee the same terms of employment for a posted worker as for temporary employees working in the same country. For international transport, the regulations will be determined separately in the Mobility Package currently being discussed at the level of the European Parliament and the Council. The time for transposition of the Directive on the posting of workers into national law is 2 years from the entry into force of the Directive.

“The process of work on the amendment of the posting of workers directive has proven that Polish lobbying in the EU is still weak. We lack active institutional participants in Brussels. Conclusions should be drawn from this state of affairs in order to make lobbying and communication activities of the Polish side adequate to the size of Poland in the EU. A very important regulation from the point of view of Polish entrepreneurs is the second, currently ongoing, part of the discussion on the posting of workers in international transport. We are constantly striving to make the final decision in this matter as painless as possible for Polish transport companies,” comments Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers. 

The change of regulations consisting in shortening of the current posting period from 24 months to 12 (or 18) is unfavourable from the point of view of Polish entrepreneurs. One must hope that it will not critically affect the functioning of Polish companies on the markets of other countries of the European Union. One of the consequences will probably be a more frequent employee turnover due to a reduced posting time.

Contents of the press release “Posting of workers: Council confirms the compromise text agreed with the European Parliament”: www.consilium.europa.eu/pl/press/press-releases/2018/04/11/posting-of-workers-council-confirms-the-compromise-text-agreed-with-the-european-parliament 


Photo. European Parliament/ Creative Commons licence / flickr.com

5.04.2018

 

Conditions for conducting business activity in Poland.
Necessary improvement of legal and institutional business environment
and diametric change of the tax system

 

In Poland, in terms of the legal and institutional business environment, there is still much room for improvement. These are the conclusions from the analysis of international economic rankings, where in three out of four summaries, Poland achieved a worse result than the year before. To change this, the Polish tax system should be amended, made easier, more logical, and better understandable. It is necessary to rewrite numerous tax bills and reduce non-wage labour costs. These are the recommendations of the Union of Entrepreneurs and Employers, which were discussed as part of this year’s presentation of the report “Conditions for conducting business activity in Poland 2018”.

“After Constitution for Business, it time for the tax system and “state within the state”, acting as if next to it and apart from it, independent giants such as SANEPID, construction inspectorate and more than 40 other institutions alienated from economic policy and institutions acting without any supervision, being an entrepreneur’s nightmare,” said Cezary Kaźmierczak, President of the Union.

In 2017, Poland was one of the fastest-growing economies of the European Union, next to Ireland (7.8%), Romania (7%), Malta (6.6%) and Estonia (4.9%). One may conclude the increase in Polish GDP is at least to a certain extent the effect of the favourable situation in Europe. On the other hand, the worse results in this year’s rankings are, according to the Union’s experts, a disturbing symptom, demonstrating an insufficient pace of implementation of regulatory, pro-business changes.

Among the key determinants of running a business is the tax system, which is assessed in Poland as bad (2.2 on a five-point scale). The Online Legal Acts System indicates that in 2017 basic tax laws changed 36 times. Another problem is the level of complexity of Polish tax law. According to the Global Competitiveness Report 2017-2018, prepared by the World Economic Forum, it is the most problematic factor for running a business in Poland.

“In order to realise the complexity of our tax system, we need to quote a few numbers. Five laws, crucial for the Polish tax system, cover over 1,200 pages of text. With the optimistic assumption that the average reading rate is 200 words per minute, and 250 words fit on the page, reading these rules would take over 26 hours of uninterrupted reading. And one had better remember this is only a fraction of the tax law, as one should also consider the judicial decisions and interpretations issued by tax authorities,” comments Katarzyna Niemyjska, the Union’s Department of Law and Legislation director.

The level of complexity of the Polish tax system is reflected in the annual report of Paying Taxes, prepared by PwC and the World Bank. The Polish tax system was evaluated in 2018 as being 51^st in the world, ranked lower than the tax regulations of Botswana, Azerbaijan and Rwanda.

Another important barrier to running a business in Poland is the high share of compulsory social security contributions in general labour costs – it amounts to 29.7% and is the 12^th highest among OECD countries. As a result of high non-wage labour costs in Poland, with a gross salary of PLN 4,000, the employee earns little more than PLN 2,850 net, while his full-time job costs the employer over PLN 4,800. This means that roughly 50% of the gross salary goes in one form or another to the state and not directly to the employee.

“The basic demands of the Union of Entrepreneurs and Employers regarding the repair of the Polish tax system remain the same as last year. Above all, one should focus on a comprehensive change – in essence, rewriting the majority of tax acts from scratch – legal acts in the current wording become less and less understandable, and subsequent amendments only complicate them even more. As we speak, there are definitely too many of them. One cannot demand from the Polish people, including entrepreneurs, that they will act one hundred percent in accordance with the provisions of the tax law if key laws are changed as often as in Poland,” claims Cezary Kaźmierczak, President of the Union.

“A well-functioning judiciary is one of the main factors affecting the conditions of running a business in a given country. According to the latest edition of the prestigious Doing Business report, presented annually by the World Bank, the court enforcement of a contract takes in Poland 685 days and costs 19.4% of the value of the subject of the dispute. Thus, in this category, Poland is ranked on the 55^th place out of 189 countries considered. It is the exact same result achieved both in last year’s ranking and in 2016. This means that in the light of the analysis carried out by experts of the World Bank, the Polish economic judiciary de facto ‘stands still’ at least for the third year in a row,” says Jakub Bińkowski, Union expert.

In the Global Competitiveness Report, in terms of independence of courts, Poland was rated as 99^th out of 137 countries analysed. This means a decline compared to 2016, when we were 81^st out of 140 countries.

In a different ranking – Doing Business 2018, Poland was place 120^th out of 190 countries in the category of starting a business (this indicator refers to the establishment of a limited liability company). It is a fall from the 107^th place achieved in the analysis for 2017 (and an even bigger one compared to 2016, when Poland was 85^th).

“A country such as Poland should be its region’s economic leader and ought to set standards rather than try to adjust to them. These reservations aside, one must at the same time appreciate the initiative of the legislator, who in the analysed period managed to implement a number of significant and beneficial changes for entrepreneurs. In 2017, the law introducing the legal certainty clause entered into force. We also positively evaluate the signing of the Constitution for Business. The new law introduces solutions for entrepreneurs better than those hitherto in force,” said the Union’s President Cezary Kaźmierczak. “However, the amendment to the Pharmaceutical Law we consider to be undoubtedly harmful, under which the principle of the so-called ‘Pharmacy for a pharmacist’ rule was implemented.” he added.

The Union of Entrepreneurs and Employers postulates conducting pro-freedom policy, reducing a significant part of unnecessary regulations, and a strong liberalisation of the economy, combined with prudent tax legislation, based on much higher legislative standards. These recommendations are therefore the same as they were last year.

5.04.2018 Union of Entrepreneurs and Employers Report: Conditions for conducting business activity in Poland 2018

Warsaw, 4th April 2018

 

The Union of Entrepreneurs and Employers following the decision of the District Court in Warsaw, 7^th Civil Registry Department of March 23^rd, 2018, obtained the status of a representative organisation, as defined in art. 24 sec. 2 of the Act of July 24^th, 2015 on the Social Dialogue Council and other institutions for social dialogue.

“This news is extremely comforting for us. From the very beginning, getting the status of a representative organisation was one of our main goals. This will allow the Union to actively participate in social dialogue, and thus enable more effective implementation of the Union’s statutory tasks in the area of efforts to ensure the conditions necessary for Poland’s economic development and increasing economic competitiveness”, comments Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers.

As it was stated in the justification of the decision of the Court: “the applicant fulfilled all the criteria necessary to obtain the status of a representative organisation”.

On the day of the application’s submission, in accordance with the data in the statements on the number of employees and the basic type of activity, the Union associated employers of over 300,000 thousand people. The organisation operates in entities of the national economy whose basic activity is defined in 13 sections of the Polish Classification of Activities (PKD), referred to in the provisions on public statistics. Furthermore, the Union is an inter-branch organisation. It has members of 11 regional employers’ organisations, with headquarters located in 9 voivodships.

The Union of Entrepreneurs and Employers was founded and registered in the National Court Register on August 18^th, 2010. The basic duty of the organisation is to protect the rights and represent the interests of its associated members before the authorities and government administration, local self-government bodies as well as trade unions.

Moreover, the Union has been focused on the issues most important for Polish entrepreneurs from its very beginning, including the simplification of the tax system, reduction of bureaucratic obligations, and removal of investment barriers for entrepreneurs. In the organisation’s Manifesto it is written: “The Union initiates and supports all activities aimed at improving the conditions of functioning of enterprises in Poland”.

The Union currently associates 51,815 companies that employ over 522,000 people. Within the Union’s structures, there are 14 local organisations and 16 industry organisations.