Warsaw, 8^th July 2021

Commentary of the Union of Entrepreneurs and Employers regarding the proposal to tighten the ban on Sunday trade

On 1^st March 2008, restrictions on Sunday trade were enforced in Poland, which over time evolved into an almost complete ban. The authors of the act which made this solution law had two main goals in mind: to improve the situation of employees in the retail sector, and to boost the competitive position of small stores against larger chains.

From the very beginning of the debate revolving around this act, experts of the Union of Entrepreneurs and Employers have warned that most likely that neither of the assumed goals would be achieved. To back their thesis, they discussed other European countries that have in recent years been abandoning restrictions of this kind in the trade sector rather than introducing them.

Three years later, one can clearly say that our forecasts came true. The structure of the retail sector continues to change to the detriment of small shops (their numbers are decreasing, while the position of supermarkets and discount shops is growing). Retail chains have learnt to use new solutions in such a way as to change the purchasing habits of consumers and, as a result, the Hungarian scenario has become true in Poland – aggressive sales on Fridays and Saturdays have made customers used to making larger purchases once a week. At the same time, approximately half of the employees in the retail sector are still work on Sundays.

With the above-listed facts in mind, we evaluate the proposals to tighten the ban on Sunday trading, by restricting the exceptions mentioned in the act, as negative and consider them pointless.

First of all, in line with the arguments presented above, the ban on Sunday trade does not give a helping hand to  small shops. Statistical data on the number of stores shutting down for good seems to confirm this thesis sufficiently, however, we decided to develop an additional econometric analysis.

Using an econometric model, we examined the impact of the ban on sales volumes in small businesses. Increasing restrictions on trade on Sundays by merely a level causes a 6.3% drop in the value of food and drink sales in specialised stores which are companies employing less than 10 people, provided other factors remain unchanged. On the other hand, the introduction of a complete ban on Sunday trading causes a 25.2% decrease in the value of retail sales of food and beverages in stores that  are companies employing less than 10 people, providing other factors remain unchanged. Small neighbourhood grocery stores, which are supposed to be among the main beneficiaries of the Sunday trade ban, obviously lose out on this solution to the competition.

Secondly, the ban does not significantly improve the situation of employees in the trade sector. A significant part of them are still working on Sundays, and those covered by the act face increased traffic on the days preceding those when it is not allowed to sell goods. In this context, a much more effective solution would be to introduce a guarantee in the Labour Code of two Sundays off every month month for each employee, which we have been proposing for years.

And finally, there are significant doubts of a technical nature concerning the proposed model of tightening the ban. This is because (according to media reports) it would be based on the analysis of the share of revenues obtained by a given institution in the scope of activities covered by the exception. As a result, in order for a point of sales, which also operates as a post office, to be able to make use of the exception provided for postal points of contact and operate on Sundays, it would have to obtain at least 50% of revenues from the provision of postal services in the month preceding the inspection. This means that theoretically it would be possible for a particular institution to be open on Sundays in one month and be closed the following one. Moreover, such a construction would require recording revenues according to the division into activities covered by the exception to the ban on Sunday trading and other activities. Thus, additional confusion would arise – both from the point of view of customers who would not be sure whether a particular shop is open on Sundays in a given month, and from the point of view of entrepreneurs who would have to deal with new administrative obligations.

To sum up, the Union of Entrepreneurs and Employers opposes the Sunday trade ban and consequently also opposes the tightening of regulations in any scope. If the legislator were to consider any kind of modification to the regulations enforced in 2018, it should go in the opposite direction and aim at liberalising regulations and free trade on Sundays. The experiences of recent years have shown that the ban failed to achieve any of its original objectives.

 

See more: 08.07.2021 Commentary of the Union of Entrepreneurs and Employers regarding the proposal to tighten the ban on Sunday trade

Warsaw, 15^th June 2021

ZPP Report: Through administrative practices, protectionist regulations on the domestic market, and a smear campaign against Polish companies France makes it difficult for Polish entrepreneurs to operate

The problems faced by Polish entrepreneurs in France are enormous. Polish companies are harassed by excessive controls and fines. At the same time, French law contains provisions that openly violate the freedoms of the single market, while a slanderous media campaign creates a climate in which it is easy to justify additional controls and restrictions.

According to Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers (ZPP): “France has a difficult time with accepting Polish entrepreneurs in a role other than cheap subcontractors. What we are dealing with are various repressions against Polish companies, and we believe that the Polish authorities are not fighting this phenomenon with enough spirit. If we want to change something in these matters, it is necessary to appropriately treat contractors from Western Europe who operate in Poland.”

The Union of Entrepreneurs and Employers published a report which collects entrepreneurs’ stories and recounts their problems related to running a business in France. While the report was being created, the Union encountered severe methodological limitations. In fear f repercussions from the French authorities, numerous entrepreneurs chose not to discuss their problems or asked for confidentiality and anonymity. Fear is therefore an important factor limiting the availability of data.

The story of FructoFresh is testament to how the French administration allows domestic companies to build their economic position while in direct violation of European law – to the detriment of both consumer safety and the integrity of the single market. The French labour inspection intimidated the representative of Aterima Work to such a degree that he gave up running business operations in France. And the case of the unlawful impound of a vehicle owned by a Polish transport company shows just how painful the inactivity of the authorities can be in the face of problems of Polish companies.

“Moreover, applying the notion of social dumping stigmatises posted workers. The very concept is based on comparing the illegal practice of marketing products below their production price with the perfectly legal practice of carrying out work at a more competitive rate. It also suggests that working in another member state is something forbidden, when in fact it is one of the foundations of the single market,” adds Kamila Sotomska, the Union’s Deputy Director of the Department of Law and Legislation.

See more: 15.06.2021 Report by the Union of Entrepreneurs and Employers Problems of Polish entrepreneurs in France

Brussels, 19 July 2021

Open Letter on the Digital Services Act (DSA) and Digital Advertising

 

We are a broad-ranging coalition of European stakeholders from the digital advertising and media ecosystem, including digital media publishers, content creators, communications agencies, technology providers, eCommerce businesses, entrepreneurs, and software developers. As the European Parliament moves to finalise its position on the proposed Digital Services Act (DSA), we respectfully voice our firm opposition to the ban on targeted advertising that has been put forward by some political groups. More broadly, we call on the EU legislator to recognise the value of the EU’s existing legal framework for privacy and data protection and to avoid the inclusion of provisions in the DSA that would undermine it.

We fully support requirements in the DSA proposal that seek to improve the overall B2B and B2C transparency of digital advertising. However, we cannot endorse a European law that aspires to constrain online business models through bans and prohibitions of practices that are already comprehensively regulated by existing privacy and data protection laws. If reflected in the final text, such disproportionate, unjustified restrictions would heavily undermine the sustainability of European media and the open internet as well as perpetuate legal uncertainty, including by creating unprecedented complexity in compliance and enforcement.

The functioning of democracies critically depends on citizens having access to services, knowledge and information online. A ban on targeted advertising would effectively strip businesses of critical revenue that enables them to guarantee such access and deprive European citizens of a significant portion of the content and services they benefit from today. Without a clear alternative, more content and services would be pushed behind paywalls, with disproportionate effects on lower-income households in particular. Consumers who do not wish to receive personalised advertising or be “tracked” online can simply leverage existing law to refuse it, before they even start consuming ad-supported content.

The recently-released Reuters Institute Digital News Report 2021 cites ‘pressing concerns about what happens to those who have limited interest or who can’t afford it’ as ‘more high-quality content [is] disappearing behind paywalls’, whereas a study requested by the CULT Committee ‘Europe’s media in the digital decade’ warns of a ‘decline in the access to relevant information’ as a result of content becoming paid-only.

Moreover, such measures would undercut market entry opportunities for start-ups and SMEs in need to reach their customers, create brand awareness and scale, especially in current times when economic recovery is key. Personalised ads are instrumental for regional SMEs and exporters with unique products who need to reach a global customer-base, but also essential for EU´s big brand champions whose business is fundamentally supported by improved addressability, as they seek to provide the right marketing messages to the right audience at the right time.

The EU has the most sophisticated privacy and data protection legal framework in the world, with heavy sanctions. If the Parliament wishes to increase consumer trust online – one of the adduced objectives of theDSA proposal – it should insist on effective enforcement of that current framework and reject the temptation to extend the scope of the DSA in ways that would create regulatory turmoil and put the financial stability of the Europe’s local businesses and media in peril.

See more: Open Letter on the Digital Services Act (DSA) and Digital Advertising

Warsaw, 16^th July 2021

 

The Union of Entrepreneurs and Employers launched a project to help companies from Belarus in cooperation with the city of Łódź

 

The Union of Entrepreneurs and Employers (ZPP) has launched a Contact Point for Entrepreneurs from Belarus, the purpose of which is to provide comprehensive organisational assistance to Belarusians interested in investing in Poland, including temporarily relocating their business. The project is a joint venture with the city of Łódź.

Support offered by ZPP includes, among others:

• providing information on the enterprise registration process and the regulatory environment for business in Poland;
• consultancy in the field of economic expansion, gaining local contacts and business partners;
• support in contacts with relevant public authorities;
• assistance in other areas, allowing investors to efficiently and safely develop their business in Poland.

The Union’s project is co-created with the Łódź City Hall known for creating favourable conditions for Belarusian companies to function normally and scale their business. Entrepreneurs deciding to grow their business in Łódź can count on the support of the Economic Development and International Cooperation Office. The representatives of the City of Łódź are focused on supporting entrepreneurs and overcoming barriers together. Importantly, the City of Łódź has experience in conducting effective onboarding of foreign investors and is characterised by a flexible and pro-entrepreneurial approach.

All entrepreneurs interested in finding more about business development opportunities in Poland are invited by the Union of Entrepreneurs and Employers to contact us at belarus@zpp.net.pl.

“We want to shape good standards of cooperation between the world of business and local governments. Communities will only benefit from it. Presently, due to domestic difficulties, Belarusian companies are in part transferring their operations to other countries. At the beginning, we focused on the IT sector as Łódź is a hotbed for companies from this sector, and IT companies from Belarus quite often have an international and global dimension. Three companies have already benefited from our assistance, and approximately 30 more have contacted us,” commented Marcin Nowacki, Vice President of the Union of Entrepreneurs and Employers.

During the joint conference inaugurating the project, Hanna Zdanowska, the Mayor of Łódź, welcomed Belarussians to Łódź:

“We invite the people of Belarus to Łódź. We invite Belarusian companies. Join us, work and live with us, be safe. Apart from the ZPP Contact Point, we also opened the Łódź Multicultural Centre in ul. Narutowicza 8/10. Foreigners living in Łódź will have the chance to receive psychological support or assistance in the event of violence or discrimination. It is also important that foreigners have the opportunity to benefit from the support of an individual assistant who speaks one of four languages: English, Ukrainian, Belarusian or Russian,” said Mayor Hanna Zdanowska. “Over the year to come, we will research and investigate what kind of problems foreigners have encounter in our city. Based on experiences from other cities, we know that these are often problems related to language or insufficiently comprehensible official forms. Legal consultations are also essential. Łódź has always been an open city and we cordially invite our new neighbours and fellow entrepreneurs. There is work in Łódź, decent costs of living, and a creative, interesting and positive atmosphere. Welcome to Łódź.”

Warsaw, July 16, 2021

 

ZPP’s comment on the proposal to establish a global CIT tax

 

The Union of Entrepreneurs and Employers is concerned that initiatives aimed at harmonizing tax regimes on a global scale might be detrimental
to the competitiveness of the Polish economy. Moreover, the proposals to establish a global minimum CIT tax are unlikely to solve the problem of tax base erosion
and the use of aggressive optimization mechanisms. Thus, we believe that a much more appropriate direction is to replace the corporate income tax with a low-rate sales tax.

On July 1, 2021, Poland, along with 129 other countries of the world, issued a joint statement on the willingness to develop new rules for taxing large international enterprises, including the taxation of Big Tech. As a result of over two years of work at the forum of the Organization for Economic Co-operation and Development (OECD), solutions are divided into the so-called two pillars.

The First Pillar consists of activities aimed at developing new rules concerning the place of income taxation and new rules for allocating income to individual countries in which the activity is carried out. On the other hand, the Second Pillar assumes the creationof a global minimum CIT tax. The minimum tax rate on the income
of multinational companies has been set at least 15 percent but may be increased as international negotiations progress on the implementation of Pillar Two.

In our view, the implementation of these initiatives will hit the competitiveness of the Polish economy.

Poland has one of the lowest effective CIT rates in the European Union, amounting to 15.3%. The chart below shows the inverse relationship between the inflow
of foreign direct investment and the amount of the effective corporate tax rate. In other words, international capital tends to migrate to jurisdictions with lower CIT rates.

 

Figure 1. Effective CIT rate and FDI flows

Source: own elaboration based on: OECD, Effective tax rate, online: Effective Tax Rates (oecd.org); OECD, FDI flows, online: Foreign direct investment (FDI) – FDI flows – OECD Data.

 

The inflow of foreign capital, referred to as Foreign Direct Investments (FDI), results in the transfer of technology to the country receiving capital, contributes to the development of the local labour market, and the integration of international trade. Moreover, it helps to create a more competitive business environment and accelerates the development of enterprises.

All the above-mentioned effects translate into higher economic growth, which is the most effective tool for reducing the economic distance between developed countries and developing countries, including Poland. It should be mentioned in this context that the so-called FDI played a key role in generating growth in the economies of the former socialist bloc. Countries such as Estonia, Poland, Czech Republic, and Slovenia, in the period of economic and political transformation, offered preferential CIT rates as an additional magnet to attract multinationals.

The proposed reform introducing the so-called global CIT will take away the so-called emerging countries their predominance in the form of preferential tax rates. Thus, the beneficiaries of the proposed solutions will be primarily the richest countries with an established position, which do not have to compete with the amount of tax burdens. The projected, additional tax revenues will mainly go to countries where international corporations eligible for the minimum CIT is their headquarters.
In addition to the direct fiscal effects of the global CIT agreement on national budgets, one should also bear in mind the indirect effects of global taxes, such as shifting the burden of additional liabilities onto employees of multinational corporations or consumers, or a decline in the profitability of international investments.

To sum up, the solution consisting in establishing a minimum rate of global CIT tax is an instrument favoring the most developed countries with a strong, established position in the global economic landscape. The adoption of the above rule will largely negatively affect the interests of small countries, or those whose economies have been based on free-market principles for just a few dozen years, and thus have not managed to develop an appropriate position on international markets.

Therefore, taking into account the above, we believe that Poland should retain the ability to compete in the tax system with other countries because as a motor of economic development.. Moreover, the introduction of the international tax regime will have a destructive effect on the domestic economy due to the decline in Foreign Direct Investments. It should be noted that along with capital from abroad, we also receive organizational culture and know-how, thanks to which our industry participates in the process of technological transformation, and is also an important element of global supply chains.

The ZPP emphasizes that the actions of states to limit tax avoidance and evasion must take a positive dimension to a greater extent, attracting taxpayers
and entrepreneurs not only with the amount of levies but also with the simplicity and transparency of the entire tax system. The occurrence of tax competition causes countries to strive to improve the quality of the adopted law or to develop tax mechanisms supporting entrepreneurship.

We believe that the shaping of tax policy should unconditionally remain the sovereign matter of each country, as only such an approach can reflect both the needs
and fiscal capacity of each country. On the other hand, the state of affairs in which there is natural competition between states as tax jurisdictions with varying degrees of attractiveness is a welcome phenomenon as it stimulates global economic growth.

Regardless of the above considerations, we point out that the proposals resulting from the project lasting more than two years, carried out as part of the OECD’s work, will probably not solve the most important problem, which is the erosion of the CIT tax base. Thus, the introduction of sales tax seems to be a much more effective solution, the more so as EU law does not contradict this idea.

 

See more: 16.07.2021 ZPP’s comment on the proposal to establish a global CIT tax

 

Fot. skitterphoto/pixabay.com

 

 

Warsaw, 13 July 2021

 

ZPP Commentary: EU’s climate goals come at a cost of deforestation

 

The Union of Entrepreneurs and Employers is alarming that the EU’s climate goals come at a come of deforestation while bringing little positive effect on greenhouse gas emissions. Ill-fitted policies and a focus on self-imposed targets rather than actual impact are primary reasons why this is happening. Given the costs related to the European Green Deal as well as the importance of achieving climate neutrality, we urge the European Commission to put limits to the use of bioenergy as renewable energy in the upcoming RED II revision.

Tomorrow, on July 14, the European Commission (‘Commission’) is expected to publish the ‘Fit for 55’ legislative package implementing the European Green Deal and ambitious goal to reduce its greenhouse gas emissions by at least 55 per cent by 2030. The package will include many long-awaited proposals, including the revision of the Emissions Trading Scheme (‘ETS’) and the project of carbon border adjustment mechanism.

Among other controversial policies, there is also a revision of the Renewable Energy Directive (‘RED’). First published in 2009, the Renewable Energy Directive classified bioenergy (i.e. biodiesel and biomass) as climate-friendly and obliged member states to achieve a 10 per cent renewable energy share in the final transport energy consumption (RES-T) by 2020. In 2018, a recast of RED (so-called RED II) was adopted, closing some legal loopholes and increasing the target to 14 per cent. The current revision of RED II is expected to increase the goal to 24 per cent RES-T, showing the growing reliance on bioenergy.

The role of biomass is especially important from the perspective of the Member States, which are obliged to reach climate goals. Since the evidence on the negative side-effects of increased reliance on bioenergy is growing, an idea of striking biomass and biodiesel of the renewables list has been gaining support. In response to the idea, ministers from 10 Member States have signed a letter where they urge the Commission to declare all forms of solid, gaseous and liquid bioenergy as ‘long-term sustainable energy sources’ given their ‘crucial role of bioenergy in the Member States’ energy mix to reach the EU climate goals’.[1]This letter shows that the pressure to achieve administratively set targets is so big, that the Member States are eager to overlook the negative impact on the climate of the bioenergy.[2] And the case against sustained use of bioenergy keeps growing. Below we enumerate two key arguments against it.

First, burning biofuels are responsible for more GHG than fossil fuels. On the one hand, fossil fuels such as gas and coal have higher energy density than wood pellets or biodiesel, hence it’s necessary to burn more fuel per energy unit. On the other hand, there is an issue of indirect land-use change (ILUC), namely cutting down trees (the carbon dioxide absorbent factor) in order to plant palm and soy, needed for biofuels, or worse to use it as pellets.[3]

The Commission has conducted two studies, which quantified the land-use related emissions of biofuels. They found that when ILUC was accounted for, all vegetable oil-based biodiesel had more emissions than fossil fuel. Interestingly, the more recent of the two studies have found that palm and soy oil have three and two times more emissions than fossil diesel respectively.[4] Hence, when we account for ILUC the situation looks rather grim. Since 2011 39 Mt of palm and soy biodiesel have been used, emitting 381 Mt CO2eq – 245 Mt more than the same amount of fossil diesel. If nothing changes, in the next 10 years the EU will emit 174 Mt of CO2eq more than the conventional diesel emissions. This is equivalent to the emissions of 95 million extra cars on the road.

Second, the sustained use of biofuels leads to massive and unsustainable land conversions. A study by Transport & Environment has found that the EU’s demand for soy and palm required 4 million hectares of land, while the demand for palm oil alone required conversion of 1.1 million hectares of mature land in Southeast Asian countries into new palm plantations. According to Euractiv, the deforested area corresponds to the size of the Netherlands. To make the matters worse, the forests that were converted are the habitat of the remaining orangutan population. T&E estimate that the EU’s increased demand for palm oil diesel is responsible for the destruction of 10% of the world’s remaining orangutan habitats. A further increase to 24 per cent renewable energy share in transport can double the deforested area. It is clear that such a strategy is contrary to the EU’s Biodiversity Strategy.

To sum up, the EU’s increased use of biofuels led to numerous negative consequences for the environment: increased GHG emissions, equivalent to emissions of 95 million cars, deforestation of the size equivalent to the area of the Netherlands and the destruction of 10 per cent of remaining orangutan habitats. Nevertheless, in theory, the EU’s is meeting its’ climate targets, since biofuels have been classified as ‘green’. Given the tremendous costs related to the implementation of the Green Deal as well as the importance of climate protection, we urge the Commission to look beyond its targets and take into consideration wider and real implications of its policies. In our opinion, the use of bioenergy should be limited within the framework of the upcoming RED II revision in order to avoid further negative effects on the environment.

 

[1] Among signatories there were countries who greatly depend on wood in their energy mix, such as Sweden, Finland and Estonia, but also Visegrad countries, including Poland.

[2] The same point can be seen in the demand for biofuels during the Covid-19 crisis. Despite the record low demand for energy, the volume of biofuels used by EU transport sector did not decrease, while in some countries like Germany or Italy it has even increased. This can be best explained by reference to the EU transport targets under the RED as well as Fuel Quality Directive for 2020.

[3] The EU rules officially prohibit cutting down trees to source pellets, and allow only for wood residue to be used for purposes of biomass, while environmental protection activities claim that it is a standard practice.

[4] The issue was to a certain extent addressed by RED II, which classified palm oil as high ILUC risk and introduced a phase out by 2030. Nevertheless, the problem was not solved completely since other crop based feedstock, including soy, and biomass is still allowed. Keeping in mind the potential increase to 24 per cent RES-T, unsustainable use of land, deforestation and biodiversity loss is very likely to occur.

Sources:

https://www.government.se/493efb/contentassets/764497619c0d4dda9c433db8c0d6ab5b/ministers-letter-on-bioenergy-in-taxonomy

https://www.transportenvironment.org/sites/te/files/publications/Biofuels%20briefing%20072021.pdf

https://www.ft.com/content/c3b00115-562e-4d06-bd11-f46a3f9366b1

https://www.euractiv.com/section/transport/news/eu-biofuels-goals-seen-behind-deforested-area-as-big-as-the-netherlands/

 

See more:  ZPP Commentary: EU’s climate goals come at a cost of deforestation

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Warsaw, 7^th June 2021

 

The Polish “New Deal” should make the country’s tax system more attractive;
CIT Payers Forum on fiscal policy in Poland

 

How can the Polish economy compete with European tax havens? What should the Polish tax system look like to become a magnet attracting new companies? What fiscal instruments can help the Ministry of Finance effectively enforce corporate tax obligations? These are just some of the questions answered by the participants of the “CIT Payers Forum” organised by the Union of Entrepreneurs and Employers and attended by representatives of the Ministry of Finance, largest CIT payers in major industries, as well as experts on economy and taxes.

Ministry of Finance: good regulations do not exist without dialogue with business

The Ministry of Finance has for ages openly been admitting that it is not possible to shape tax regulations without having a dialogue with the market, the world of business, and the consultancy industry. During the “CIT Payers Forum” (“Forum Płatników CIT”), representatives of the Ministry assured they would further pursue the policy of a close dialogue with business, seeing it as an opportunity to draw on the experience of companies in the area of legislation.

“The views of entrepreneurs are like a compass allowing us to navigate perilous reefs during the journey the Polish economy is on following the changing pandemic reality. The fact that it relatively well survived three subsequent waves of the epidemic and three lockdowns is the result of the short distance between business and the economic regulator and tax authorities. It is the result of constant mutual trust building and co-created solutions, the result of us talking. Now is the time we should plan scenarios for the reboot of the Polish economy. I strongly believe that in the second half of the year we will see a rebound that will mark the beginning of post-pandemic recovery. We want to implement a number of tax projects aimed at supporting Polish business, for example through pro-investment reliefs which would be available to companies as early as January next year,” said Jan Sarnowski, Undersecretary of State at the Ministry of Finance.

The Ministry of Finance emphasises that without such cooperation it would not be possible to implement the financial shield or introduce tax amendments favourable for entrepreneurs. Within the latter group, the Ministry names, among others, the extension of the scope of application of the 9% CIT rate or changes in the area of lump sum on recorded revenues by increasing 8-fold the income limit entitling to take advantage of this solution.

Representatives of the Ministry also assure that further legislative solutions aimed at strengthening and rebuilding entrepreneurship in Poland are waiting to be implemented this year. The assumptions of the “New Deal” provide, i.a. over a dozen tax breaks, including those for robotisation and production automation, encouraging Polish workers to return to the country or stimulating employment growth in various sectors of the economy. They also include the second SLIM VAT 2 simplification package, as well as provisions encouraging companies to continue investing in Poland, which would allow them to responsibly plan such investments for years to come.

In the third quarter of 2020, the Ministry of Finance will also start implementing the EU e-commerce package, that is, facilitating online trade with other European countries. In the fourth quarter, the national e-invoice system is to be implemented.

Tightening CIT collection as a priority of fiscal policy

Participants of the “CIT Payers Forum” devoted a lot of time to the discussion about the role of the corporate income tax in generating budget revenues. The Ministry of Finance recalled that measures to tighten the CIT collection system had brought considerable growth results in recent years.

“Recent years have been a period of substantial success in increasing CIT revenues. While in 2014-2015, income from CIT amounted to PLN 30-odd billion, in 2019 it was already at the level of PLN 50 billion. The revenues also increased in relation to the GDP. According to the estimates of the Polish Economic Institute (PEI), the closure of the so-called “CIT gaps” contributed to this effect. According to PEI, this CIT gap decreased by 1% GDP in the years 2014-1018. However, we are still below the EU average, which in 2019 equalled 6%. Poland ranks around 5.5% in relation to the income of the entire public finance sector. According to PEI, the CIT gap in Poland decreased from 2% GDP in 2014 to 1% GDP in 2018, that is up to PLN 20-odd billion. Certainly, we would have managed to obtain a dozen or so additional billion zloty if we had better tightened the system in terms of the CIT gap,” argued Łukasz Czernicki, Chief Economist at the Ministry of Finance.

Maciej Żukowski, tax advisor and former Director of the Income Tax Department at the Ministry of Finance, clarified which tightening measures were, in his opinion, discussed.

“Certainly, the amendments to the CIT had a direct impact on its collection. Highly specific regulations, regulations tightening the system or introducing BEPS (base erosion and profit shifting) and ATAD (the Anti-Tax Avoidance Directive) as well as those regarding transfer pricing contributed to this. It seems to me that the increase in CIT revenues is not influenced by the MDRs (mandatory disclosure regimes), because they are compliance regulations to a higher degree rather than a tightening measures, but in a sense they “crown” the whole idea for an income tax reform. In particular, the provisions on the separation of capital gains from operating profits improved CIT collection in 2018-2019, as 2020 is not a representative year to draw conclusions from. At least 12% from PLN 50 billion from CIT could still be received from taxpayers without raising taxes,” noticed Maciej Żukowski.

Andrzej Sadowski, President of the Adam Smith Centre, compared CIT to a fee paid by businesses for access to the Polish market.

“The disproportionate collection of CIT is noticeable. CIT, like the RTV subscription, is a “voluntary” tax. In both cases, we see an almost 50% share of non-payers. Can the Polish state, for providing access to its territory, the market, consumers, and infrastructure, afford what no office tenant would allow to happen? Companies pay their landlords every month, whereas they do not pay for the services of the Polish state,” said Andrzej Sadowski, economist, President of the Adam Smith Centre.

In the public debate, CIT itself is often considered in terms of economic patriotism. Meanwhile, in the opinion of the largest payers of this tax in Poland, its essence lies elsewhere.

“We do business in Poland and the prosperity of our country affects the prosperity of our company. According to the data published by the Ministry of Finance, Philip Morris has paid over PLN 1.2 billion in CIT since 2012,” said Wojciech Niewierko, Member of the Management Board for External Relations at Philip Morris for Poland and the Baltic States.

Representatives of the banking sector, on the other hand, raised the need for greater predictability and transparency of the legal and fiscal environment, including further strengthening of cooperation between entrepreneurs and the government. They also emphasised that the banking sector remains one of the largest CIT payers in the country.

“Banks dominate the list of the largest CIT payers. We would like to draw attention to the fact that our regulatory operating costs, such as contributions to the Bank Guarantee Fund and the borrower support fund or the bank tax, do not constitute tax deductible costs. Minister Sarnowski used the word “simplification” numerous times to mention planned initiatives in the area of taxes. As a sector, we are pleased with the announcement of such simplifications, but we can see that in practice, due to insufficient consultations with business, initiatives aimed at simplification rather cause difficulties,” said Łukasz Szczygieł, Director of the Tax Department at ING Bank Śląski.

Representatives of the fuel sector stressed the need for further simplification of the tax system and consistent removal of its irregularities. In their opinion, the complexity of some tax regulations may create a barrier for some companies willing to pay taxes diligently.

“The complexity of tax law means that some payers are unable to properly fulfil their obligations. And there is an increasing number of obligations to be taken care of. Many of them have a positive effect, but especially the smaller entities may not keep up with them. On the other hand, in large corporations, the complexity of business operations is a problem. A correct implementation of solutions in such large organisations requires a lot of preparation. This brings us to the conclusion that the law should be prepared well in advance. At the end of the day, we would all expect those who pay taxes correctly to be efficiently and effectively verified by the authorities. This brings us to the postulate of removing complexity in tax law. The institution in charge of tax explanations certainly makes life easier for taxpayers,” said Krzysztof Berliński, Director of the Tax Office at PKN Orlen.

The fight against aggressive tax optimisation

Participants of the “CIT Payers Forum” were also asked about solutions that should be implemented to improve tax collection. Maciej Żukowski drew attention in this context to the important role that, in his opinion, the National Revenue Administration (Krajowa Administracja Skarbowa) has to play in this area.

“Dishonest taxpayers constitute an area for the National Revenue Administration to prove themselves. To force the NRA to create a so-called “level playing field” is the role of KAS, which should effectively enforce such regulations,” – described Maciej Żukowski, tax advisor and former Director of the Income Tax Department at the Ministry of Finance.

The disproportions in the amount of CIT paid by companies was pointed out by the Polish Economic Society (Polskie Towarzystwo Gospodarcze) in their report covering the study for 2012-2019.

“The structure of CIT assumes the possibility of reducing the income by tax costs. If there is such a possibility, it is also possible to transfer profits: transfer pricing, fees for trademarks, interest on loans, etc. If the regulations make it possible, unless we make a revolution, as long as we continue to operate in this system, it all comes down to the camera of the National Revenue Administration. However, it is not allowed to pass judgment that the one who does not pay CIT is a fraud right away. If someone carries out extensive investment activities, especially in the same location where they pay tax, it is understandable that their tax base is reduced. More reliable controls are needed. Wherever there is activity, it is appropriate to contribute to the state treasury,” said Krzysztof Rutkowski, Partner at the law offices Kancelaria Doradztwa Celnego i Podatkowego Rutkowski i Wspólnicy and co-author of the “CIT and EBIT comparative analysis of representatives of selected sectors based on the data of the Ministry of Finance for the years 2012-2019”.

An attractive tax system is a simple one

A study by the Union of Entrepreneurs and Employers (ZPP) based on data from the Ministry of Finance from 2017 showed that out of 509 thousand CIT payers less than 345 thousand showed taxable income. After the deductions, the final number of taxpayers reporting CIT due was only 194,000. It is easy to calculate that only approximately 38% of taxpayers pay CIT. In the opinion of ZPP, one of the reasons for this state of affairs may be the complexity of the regulations.

“Can we become like Estonia or Ireland in fiscal terms? The most important features of those two systems are their simplicity and transparency. The data of the World Bank show that the average time necessary to complete tax returns in Poland is approximately 334 hours per year, in Estonia – about 80 hours, and in Ireland – circa 50 hours. Simple tax regulations are the key to the development of entrepreneurship and to the improvement of the tax system at a state level. It is worth leaning towards the changing philosophy and introducing the revenue tax replacing CIT. Of course, we see a challenge related to the need to establish an adequate rate of such a tax, but ultimately – regardless of the industry – all entities would include the cost of this burden in the prices of their products or services. Our recommendation is therefore to consider the revenue tax, which would be impossible to avoid, as well as easy to calculate and collect,” said Kamila Sotomska, Deputy Director of the Law and Legislation Department at the Union of Entrepreneurs and Employers.

The Polish Chamber of Commerce has been drawing attention to the need to reduce the complexity of the tax system for many years as well. However, the PCC notes that tightening the provisions of the law often does not keep up with the new tools utilised by companies that use tax optimisation.

“CIT is a tax that companies should pay. If they don’t, they should at least show investment costs as a reason why they don’t. Then such an income tax exemption would be justified, because those companies would be creating added value for the economy of a given country. However, if such activities are not carried out, then something is obviously wrong. The regulations are there, now we need the right analytical tools. Furthermore, it is important to reward reliable tax accounting,” noted Agnieszka Durlik, an expert of the Polish Chamber of Commerce.

Poland as an investment paradise – how to increase the attractiveness of the Polish tax system?

Can the Polish tax system compete with the systems of such countries as Belgium, Cyprus, Ireland or Luxembourg? Can we oppose practices that encourage transfers of profits from Poland? In the opinion of Professor Konrad Raczkowski, director of the Institute of Economics of the Social Academy of Sciences, Poland can compete with European tax havens by becoming an investment haven for entrepreneurs.

“In March 2019, the European Parliament recognised Luxembourg, Malta, Cyprus, Ireland and the Netherlands by an overwhelming majority as tax havens that facilitate aggressive tax planning. So we have a formal confirmation that these countries are tax havens. Some of them have been running tax haven policies since the 1970s. What can we, as the Republic of Poland, do to win additional tax revenues, but not necessarily at the expense of “squeezing” the tax base we have? We have two options. If we had large expenses, because of the pandemic, an increase in our deficit, debt – quite a significant one like in other countries – will we then decide to tax the existing tax base? The base will not grow, because if the taxation is too high, companies and corporations can then easily change jurisdiction. The average John Smith has it worse. But we can take a different path: broaden the tax base. This can be done by drawing in foreign companies and attracting investments that are not yet here. And this can be done by implementing changes to the Polish tax system that will make it attractive for companies. Changes which will make Poland a good tax destination. When it comes to the competitiveness of our tax system, out of 36 countries OECD countries, we rank 34^th. One has to transform one’s thinking and try to think about attracting companies from those countries that have high dynamics of generating new investments,” stated Professor Konrad Raczkowski, Ph.D., director of the Economic Institute of the Social Academy of Sciences in Warsaw.

Maciej Żukowski agreed with him, adding that unlike by increasing the base itself, it would be impossible to achieve higher levels of taxation by imposing greater burdens on the current CIT taxpayer base.

Ministry of Finance: legal predictability and business consultations are our priorities

In response to the appeals of Polish business for more predictability in tax regulations and the need to improve consultations with companies, Minister Piotr Patkowski took the floor.

“We all would like private investments in Poland to be as grand as possible. The main barrier, apart from the issue of the pandemic, is, among others, the instability of tax law. That is why we discuss at the Social Dialogue Council, among other things, the introduction of an absolutely mandatory rule of vacatio legis for all tax regulations. We want them not to enter into force overnight or next month, but always on a specific date: 1^st January or 1^st July. We will want to implement a proper vacatio legis for all new provisions, so that they are processed and announced in advance. The second absolute rule that we want to follow is a minimum of 21 or 30 days for public consultations and inter-ministerial arrangements so that all interested parties can familiarise themselves with the regulations, submit their remarks and proposals, and the government can respond to them,” said Piotr Patkowski, Undersecretary of State in the Ministry of Finance, Chief Spokesman of the Public Finance Discipline.

The Ministry also mentioned a programme of extended cooperation between the tax authorities and the world of business. Its aim is to improve the entrepreneurs’ comfort in terms of settlements with tax offices.

“We have at our disposal some non-imperative forms of influencing CIT payers, for instance a pilot cooperative-compliance programme that is being implemented by the National Revenue Administration. Taxpayers, in exchange for greater tax certainty and security and the possibility of cooperation with the tax administration, fully disclose their tax settlement mechanisms to the tax authorities. It is an optional programme, but there is a lot of interest from taxpayers. Certainly, there is also a need for the tax administration to create more effective selection tools for tax audits,” said Jakub Jankowski from the Income Tax Department at the Ministry of Finance.

Tax postulates for the “New Deal”

The Union of Entrepreneurs and Employers has been running an extensive tax agenda for many years. Some of the Union’s postulates could successfully be included in the “New Deal”, and some of them were supported by experts during the “CIT Payers Forum”. Among the supported activities postulated by the Union, there are the following:

• creating a competitive tax system that supports the development of Polish companies and attracts foreign entities, thus reinforcing economic growth;
• ensuring regulatory stability in the field of tax legislation, e.g. by introducing a minimum vacatio legis for acts regulating the economy and taxes, as well as by introducing the principle that all kinds of amendments in economic and tax law enter into force only once a year (e.g. on 1^st January);
• continuing the dialogue between the Ministry of Finance and Polish business in order to develop the best possible tax solutions;
• improving the process of public consultation regarding proposed tax solutions, including in the scope of the time to submit comments or the stage at which individual ideas are subject to consultation with business (pre-consultations, consultations regarding assumptions for draft acts).

Furthermore, the Union of Entrepreneurs and Employers maintains its regular postulate to replace CIT, which – as statistics show – remains a de facto voluntary tax, with a revenue tax that would be much more difficult to avoid and, at the same time, easy to collect and settle.

Warsaw, 9^th June 2021

 

Position of the Union of Entrepreneurs and Employers on the draft amendment to the Distance Act

 

The draft act presented by the Ministry of Development, Labour and Technology whose aim is to amend the act on investments in wind farms and some other acts (hereinafter: the Distance Act), liberalising to a certain extent the assumptions regarding the location of wind farms, is in fact a step in the right direction.

In said document, the liberalisation largely refers to the so-called “10H rule” – which is mandatory and according to which wind farms must not be located within a shorter distance from buildings and selected forms of nature reserves than 10 times the height of the turbine with raised blades. This means that the minimum distance from residential buildings for a modern wind farm with a maximum turbine height of 150-180 metres is approx. 1.5-1.8 kilometres.

The proposed amendment is a turning point in the government’s approach to the issue of the Polish energy sector transformation by allowing investments in onshore wind energy – currently the cheapest and fastest, in terms of investments, green energy source.

The growing supply deficit of green energy is a serious threat to the development of the entire Polish economy, thus also to the position of Poland in Europe. However, thanks to efficient and effective investments in onshore wind farms as well as large-scale solar sources, we can significantly reduce this deficit, providing the Polish industry with the necessary amount of cheap green energy. Moreover, a further development of these energy sources, along with the development of offshore wind farms, will positively affect the creation of Poland’s hydrogen economy.

With the above-mentioned facts in mind, the Union of Entrepreneurs and Employers would like to present feedback in the form of a series of comments which, in our opinion, will allow for increased effectiveness of the introduced regulations and thus their more frequent use by business.

I. Maintaining the “10H rule” as the administratively preferred distance

Unfortunately, the provisions of the draft act do not eliminate or soften the fundamental problem that has been present for years in the investment process in the field of onshore wind energy, i.e. conflicts within local communities related to such investments. Leaving “10H” unchanged as the administratively preferred distance will still constitute a significant investment barrier, since local governments – fearing conflicts between residents and local stakeholders – will cautiously approach the determination of closer distances when adopting local plans for investments in wind energy.

II. No simplified procedure for the so-called “repowering” process

Repowering refers to the process of replacing older machinery with next-gen turbines that have higher efficiency or higher installed power, resulting in an increase in net energy production. Importantly, the proposed regulations do not include simplified procedures for replacing wind turbines.

Facilitating the repowering process could increase the present-day supply of green energy by at least 20% in a way that is almost cost-free for the Polish economy. This could subsequently translate into an increase in green energy supply by up to 10 TWh (terawatt-hours) annually.

Therefore, we recommend introducing a relevant provision to the draft act which would stipulate that, in the case of replacement of devices with new ones (with higher environmental parameters or greater efficiency), a separate administrative procedure will be provided, which will constitute a significant simplification compared to the standard process.

III. Locating onshore installations near industrial plants

The presented draft Distance Act should be supplemented with provisions enabling or facilitating investments in renewable energy installations (in this case onshore wind farms) near industrial plants where the dominating landscape has an industrial character, and the construction of wind turbines would not adversely affect the aesthetic or environmental values of the surroundings.

Simplification of the investment process in post-mining, post-industrial or industrial areas would considerably accelerate the development of wind energy in Poland, and would also enable large domestic investors to quickly increase power from renewable energy sources (RES) for their needs, without incurring unnecessary costs.

For this purpose, it would be reasonable to introduce specific provisions to the Distance Act, which would exclude industrial development areas from the procedures introduced both by the Distance Act and envisioned in the consulted project. Furthermore, it is worth considering including in Art. 4 an exception to the obligation to keep the distance specified in the regulations in the case of construction of a wind farm in industrial areas.

An unambiguous exclusion of investments carried out in areas where industry is located from the scope of the regulations of the Distance Act would translate into a faster and more effective achievement of CO₂ reduction targets. One of the consequences of introducing such an exemption should also be the lack of the obligation to include and consult wind farms to be located in industrial areas in local spatial development plans.

An additional obstacle to the execution of investments in wind farms generating electricity for the needs of industry is laid down in Art. 35 sec. 1 of the Act of 7^th July 1994 Construction Law: the obligation to examine the compliance of a construction project with the local spatial development plan (hereinafter: LSDP) or with the land development conditions decision. The provisions contained in these documents often make it impossible to erect met masts used for wind measurements, necessary for examining the conditions prevailing at the site of the planned construction.

Henceforth, it is reasonable to supplement the above-mentioned provision with a regulation stating that the requirement referred to in this provision does not apply to technical infrastructure used to measure wind in industrial areas.

IV. Definition of a direct line in energy law

In the opinion of the Union of Entrepreneurs and Employers, one of the barriers to the development of renewable energy is the definition of a direct line contained in Art. 3 (11) (f) of the Energy Law of 10^th April 1997. The restrictive concept of a direct line requires adjustment to the requirements of Directive (EU) 2019/944 of the European Parliament and of the Council of 5^th June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU (“Internal market in electricity” replacing the “Energy Efficiency Directive”). Pursuant to Art. 2 (41) of the Internal market in electricity Directive, “direct line” means either an electricity line linking an isolated generation site with an isolated customer or an electricity line linking a producer and an electricity supply undertaking to supply directly their own premises, subsidiaries and customers;.

Pursuant to Art. 7 sec. 1-3 of the Internal market in electricity Directive:

1. Member States shall take the measures necessary to enable:
   1. all producers and electricity supply undertakings established within their territory to supply their own premises, subsidiaries and customers through a direct line, without being subject to disproportionate administrative procedures or costs;
   2. all customers within their territory, individually or jointly, to be supplied through a direct line by producers and electricity supply undertakings.
2. Member States shall lay down the criteria for the grant of authorisations for the construction of direct lines in their territory. Those criteria shall be objective and non-discriminatory.
3. The possibility of supplying electricity through a direct line as referred to in paragraph 1 of this Article shall not affect the possibility of contracting electricity in accordance with Article 6.

In light of the above, the “insular” nature of the connection between an isolated producer and an isolated customer resulting from the Polish law seems to be a disproportionate and unjustified condition in the case of energy-intensive companies operating in a continuous system. The specificity of the operation of such plants requires having an emergency power supply, securing the necessary equipment in production installations, which may be of key importance for the company’s safety. It is a real barrier that cannot be overcome when trying to conclude contracts with renewable energy producers based on the institution of a direct line.

The provisions of Directive (EU) 2018/2001 of the European Parliament and of the Council of 11^th December 2018 on the promotion of the use of energy from renewable sources (“RED II”) with regard to the definition of a renewable electricity purchase contract (on the basis of which a natural or legal person agrees to purchase renewable electricity directly from an electricity producer), have not yet been transposed to the Polish legal system, which also hampers the low-carbon transformation.

V. Duration of individual stages of the approval process of a new LSDP

Provisions specifying the course and manner of conducting public consultations accompanying the processes of establishing or changing local spatial development plans, necessary to carry out investments in the area of onshore wind farms, are cited repeatedly in the draft act. The proposed regulations define the minimum duration of each stage of the approval process of the new LSDP and the accompanying public consultations, but do not specify the maximum time. Indication of the aforementioned maximum duration of determining the LSDP could standardise the process of changes and allow for more precise estimates of the time necessary to obtain permits for the construction of a wind farm. In our opinion, this could significantly facilitate the entire investment process, and be as a result a considerable incentive for investors.

VI. Investor relations with local communities

Currently, there are instances when local government authorities, fearing the reaction of the local community, refuse to cooperate with the investor in a non-public manner. In order to guarantee the transparency of information on investment plans for wind farms in a given commune (a Polish territorial unit), the investor should be allowed to communicate with the local community through official information channels.

Although in the current legal order there are no obstacles for an investor to run an informational and promotional campaign for a potential investment in a commune, it is advisable that the information process takes place within the framework of administrative and legal institutions. Therefore, it is proposed to establish an application path in the provisions of the Distance Act for the commencement of procedures constituting the process of locating wind farms. This should be done by means of a document in the form of an application within the meaning of Art. 64 of the Code of Administrative Procedure (CAP), announced in the form of notification by public announcement (Art. 49 CAP). In the application, the investor would provide information on the planned location of the wind farm along with documents determining the environmental impact.

Information through official commune channels will contribute to increasing the community’s trust in the investor. A well-informed community will be more willing to even try to discuss adopting a resolution to proceed with the preparation (or update) of the LSDP, taking into account wind farms. The investor will also have the opportunity to inform about the projected environmental impact of this investment.

VII. Raising the threshold of built-up area for the purposes of qualifying the project as an undertaking with a potentially significant impact on the environment

Pursuant to § 3 sec. 1 (54) of the Regulation of the Council of Ministers of 10^th September 2019 on projects that may have a significant impact on the environment, in connection with Art. 59 sec. 1 (2) of the Act of 3^rd October 2008 on the provision of information about the environment and its protection, and public participation in environmental protection and environmental impact assessments, photovoltaic installations with a built-up area of more than 0.5 ha require an environmental impact assessment, and thus obtaining a decision on environmental conditions.

In this context, we recommend considering raising the threshold of built-up areas for the purposes of qualifying the undertaking as a project that can have a potentially significant impact on the environment, and thus subject to an obligatory study on issuing a decision on environmental conditions (§ 3 sec. 1 (54) of the Regulation of the Council of Ministers of 10^th September 2019 on projects that may have a significant impact on the environment, Journal of Laws 2019 item 1839) – from the currently applicable values, i.e. not less than 0.5 ha in areas covered by forms of nature protection and not less than 1 ha in other areas, up to: 1 ha in areas covered by forms of nature protection and not less than 2 ha in other areas.

At the same time, we make a reservation that the proposed solution should include the maintenance of tools for verification by competent authorities of the need to conduct a procedure regarding the decision on environmental conditions, and to possibly conduct an environmental impact assessment, even if the revised thresholds are not exceeded.

VIII. Locating renewable energy installations on grade 4 agricultural land

Due to the current legal conditions, grade 4 agricultural land is largely used for the construction of photovoltaic installations. Inscribing grade 4 agricultural land in Art. 4 (1) of the draft act would significantly simplify the future investment process for photovoltaic farms with an installed electrical capacity of no more than 1000 kW, due to the exemption from the need to conduct a study of land use conditions and directions. This in turn would have a direct impact on shortening the time of investment execution.

Summary

In the opinion of the Union of Entrepreneurs and Employers, the proposed act ought to, first and foremost, eliminate all investment barriers related to the location and operation of onshore installations. This will allow for the restoration of confidence in state policy towards renewable energy sources, which was significantly damaged as a consequence of the introduction of the Distance Act in its current wording in 2016.

One of the major barriers to wind farms investments is the lengthiness of administrative proceedings. Therefore, in view of the Union, the target model for issuing administrative decisions regarding the investment process should include one “investment permit”, which will integrate the issues of environmental impact assessment and construction law procedures.

The successful removal of the above-mentioned problematic issues will indeed lead to a dynamic development of renewable energy sources, which will in turn trigger the entire Polish economy to develop and grow, as onshore wind energy has all the necessary potential to be a remedy to both the climate and economic crisis.

 

See more: 09.06.2021 Position of the Union of Entrepreneurs and Employers on the draft amendment to the Distance Act

Warsaw, 25^th May 2021

 

Report by the Union of Entrepreneurs and Employers:
The Digital Markets Act is to provide equal opportunities, but it may diminish the quality of services for European businesses and consumers

 

The regulation on contestable and fair markets in the digital sector, known as the Digital Markets Act, tries to address some of the challenges of digitisation and to ensure fair conditions for online competition. The Union of Entrepreneurs and Employers supports all initiatives aimed at improving the competitiveness and functioning of digital markets. We are, however, concerned that the DMA may in practice lead to a deterioration in the quality of digital services for European businesses and consumers, as well as to a slowdown in technological development.

The Union of Entrepreneurs and Employers has repeatedly called for the improvement of the regulatory environment for business. We believe that the way to achieve a high level of competitiveness of our economy is to create an attractive legal-and-institutional framework for companies to function in. We stand by this position also on a per-industry basis and call for no disproportionate burdens to be placed on the digital sector.

Presently, new digital regulations seem to be proposed before enough time to allow for a thorough assessment of the effects of the previous ones has elapsed. This way, not only does the regulatory burden on entrepreneurs increase significantly, thus generating costs and hindering business operations for small European entities in particular, but also legal certainty is reduced discouraging companies from risk-taking, innovation, and investments.

According to Jakub Bińkowski, Director of the Law and Legislation Department at the Union of Entrepreneurs and Employers: “The effects of the introduction of the DMA could be severe for European businesses as well as consumers who make use of digital services. For example, while the ban on the use of business user data is intended to prevent unfair competition, its unintended practical consequences may negatively impact European SMEs, a quarter of which do not have a website. As a result of the ban, the possibilities to use geolocation will become limited, and thus local companies without a website will lose their visibility and potential customers.”

Discussing the effects of the introduction of the DMA, it is impossible to ignore the economic consequences of the pandemic. “In the opinion of the Union of Entrepreneurs and Employers, all necessary measures should be taken to ensure that overregulation does not stifle the growth of the digital sector and does not put the post-crisis recovery in harm’s way. As the ECIPE study shows, Europe as a consequence of introducing the changes proposed in the DMA risk to lose approx. EUR 85 billion of GDP and EUR 101 billion of consumer welfare – that is the equivalent of all the benefits that the EU economy has gained thus far thanks to bilateral free trade agreements,” adds Kamila Sotomska, the Union’s Deputy Director of the Law and Legislation Department.

The dynamic development of digital tools along with free-market competition foster social usefulness of the Internet and consumer welfare. Taking this into account, any attempts at regulatory interventions should be made after prior evaluation of existing regulations. Moreover, the newly designed rules cannot disregard the diversity and variety of the forms of doing business in the digital world. Regulations for the digital market should be designed with caution so that, contrary to the original assumptions, the consumers and service recipients themselves do not lose out on their introduction.

See more: 25.05.2021 Report by the Union of Entrepreneurs and Employers: Digital Markets Act

Warsaw, 10^th June 2021

 

Economic forecast for the years 2021/2022 by the Union of Entrepreneurs and Employers

 

The economic slowdown in Poland in 2020 turned out to be milder than on average in the European Union. Poland’s GDP in 2020 shrank by mere 2.8%, while the GDP of the eurozone decreased by 6.6%.

At the beginning of the COVID-19 pandemic, the Polish economy was in a relatively better position compared to other economies. The most important factor due to which recession in Poland in 2020 was milder was the small share of sectors temporarily excluded from all activity as a consequence of anti-pandemic restrictions in the generation of added value in GDP along with the structure of exports constituting mostly of consumer goods, as well as the relatively smooth course of the crisis in Germany, Poland’s main trading partner.

Poland’s dynamically evolving macroeconomic situation directly impacts the condition of the enterprise sector. In order to better understand the processes taking place in this environment, the Union of Entrepreneurs and Employers has decided to publish its own economic forecast for the next two years.

The forecast was modelled on the basis of a proprietary econometric model (description of methodology included in the document) and takes into account key macroeconomic indicators, i.e. unemployment rate, inflation rate, GDP growth rate and investment rate (in relation to GDP). The current forecasts are as follows.

Unemployment
2021: 6.1%
2022: 5.9%

Inflation
2021: 4.0%
2022: 3.1%

GDP growth
2021: 4.0%
2022: 5.1%

Investment rate (% of GDP)
2021: 16%
2022: 17.2%

Basing on the forecast for 2021-2022, three factors can be identified that will have the greatest impact on the condition of enterprises in the years to come. These are the following: a significant slump in corporate investment during the crisis and the future impact of post-crisis pro-investment packages targeted at specific industries; wage pressure as a result of high inflation, a mismatch between the structure of supply and demand in the changing labour market, and the low unemployment rate; non-uniform inflation striking harder industrial sectors and those that cannot freely shape the prices of their products and services or easily renegotiate contracts.

 

See more: Economic forecast for the years 2021/2022