Warsaw, 16^th March 2021

Opinion of the Chief Expert of the Union of Entrepreneurs and Employers on Political Economy regarding Poland’s tax policy

The economy of the Republic of Poland is still in the period of its greatest slowdown in decades. It seems that the impact of the pandemic on the economy is weakening (hopefully permanently) and the prospects of development are looking rather good. Further recovery of economic activity can be expected, supported not only by private, but also public investments. Perhaps, in the longer term, we will benefit from the redevelopment of supply chains (should this take place) and a partial reallocation of production back to Europe. Much was said on this subject at the beginning of the pandemic, but it is hard to say how it will all end.

The actual impact of all these factors that will support development in the years to come depends to a large extent on the conditions for both investment and entrepreneurship that will be created in Poland. The tax system is a major factor influencing those conditions. In particular, the level of taxation, the degree of complexity and transparency of the tax system and the predictability of taxes due, especially in the short and medium term, seem to play an important role here.

The tax burden on Poles and Polish companies has been slowly and inexorably growing recently as a result of various types of newly introduced taxes and para-taxes. Moreover, opinions have emerged that with the adopted model of social policy and the scale of fixed state expenditure (especially in the context of the current demographic situation), further tax increases are almost inevitable. OECD analyses show that in order to maintain the current level of debt in the coming decades, it will be necessary to either significantly reduce state expenditure or drastically increase taxes (by as much as up to 15% of potential GDP).

Given that the lion’s share of costs will be to keep the pension system afloat (which will probably pay pensions anyway with ever lower replacement rates), it will become increasingly difficult to curb expenditure. Especially since the political power of pensioners is growing by the year. In this situation, maintaining additional, new obligations will be progressively problematic – as well as withdrawing from them. In the short term, new taxes are becoming a remedy, and in the medium term – perhaps – the acceptance of higher levels of public debt. However, one should keep in mind that there is no consensus as to where the actual limit of the acceptable debt level is. And while it seems that the  Polish economist Marcin Piątkowski is right that a certain increase in debt limits would not be dangerous – a violation of the debt limit mechanism presently built into the constitution, and yet nonetheless partially circumvented, may turn out to be dangerous. Other limits of debt, in the current model of policy making in Poland, may not be established before the collapse of public finances.

It is therefore to be feared that the tax burden will slowly increase in the medium term. However, this does not in any way justify the government’s current short-term initiatives or the quite chaotic introduction of new and often politically motivated new levies (even if some of them could be justified). Let us try to prevent taxes from increasing in the future – but above all else, let us make sure that they do not increase unnecessarily, merely in order to achieve current political goals! Still, it should be emphasised that the model of tax policy in place in recent years, and especially since the outbreak of the pandemic, is worrying not only because the tax burden, including the burden on entrepreneurs, is growing.

It seems that objections of an even more serious nature regard to the other two factors determining the quality of the tax system that I have mentioned. With the successive introduction of sectoral taxes, the transparency of the system decreases. Furthermore, in virtually no case in which evidence-based policy could be applied in relation to the newly introduced instruments (the trade tax or the sugar tax), ex post analyses of their effectiveness are not planned, and it is difficult to expect that (in the case of a negative assessments) could influence or could have influenced the authorities’ decisions.

Chaotic and sudden changes and amendments introduced to the tax system – and this applies not only to taxes, but also to new legal regulations – also limit the predictability and thus the safety of economic activity. In conditions like these, those will benefit most who efficiently move in the world of state capitalism by means of using their influence and contacts, insider knowledge, and effective lobbying. As well as those willing to take higher risks in return for greater benefits. When thinking about long-term development, it is worth rethinking the tax system in a different way – shaped as it is today, it may soon become a very serious barrier to development. And absolutely no one would want that…

Piotr Koryś, Ph.D.
Chief Expert on Political Economy

 

See more: 16.03.2021 Opinion of the Chief Expert of the Union of Entrepreneurs and Employers on Political Economy regarding Poland’s tax policy

Warsaw, 12^th March 2021

Commentary of the Union of Entrepreneurs and Employers regarding the smartphone tax

In spite of the ongoing epidemic and the economic crisis accompanying it, the Polish government continues to invent new taxes. Over the last year, the sugar tax, CIT on limited partnerships, the rain tax, and the tax on streaming services were introduced, the collection of the tax on commerce began, and the concept of an advertising tax was presented. Recent media reports indicate that an additional project was given “a green light” – the introduction of yet another burden: a tax on smartphones. The Union of Entrepreneurs and Employers believes that the adoption of new taxes in the conditions of an epidemic is unjustified and harmful from the economic point of view, and the introduction of further sectoral and selective levies (apart from their negative impact on the market) leads to a consistent deterioration of the tax system by making it increasingly complicated. In addition to our general disapproval of multiplying tax, we are also particularly critical of the very idea of a smartphone tax.

It is clear that ultimately the economic cost of this tax will be borne by consumers forced to pay more for electronic equipment. Thus, for many households that found themselves in a difficult financial situation due to the coronavirus epidemic, the availability of such equipment (which nowadays essentially falls in the category of basic necessities required to, for instance, work from home or participate in online lessons) will decrease significantly. The rising prices of equipment will naturally reduce the competitiveness of Polish distributors against foreign entities. Electronics sold in Poland will become one of the most expensive in the region. An emerging possibility is therefore the outflow of consumers on the domestic market and the greater popularity of smartphone and laptop purchases abroad.

The systemic sense of the tax on smartphones is a completely separate matter. Its introduction would in practice consist in the extension of the catalogue of carriers covered by the so-called reprographic fee. The proceeds from it contribute to the budgets of organisations responsible for collective rights management. They are to constitute compensation for losses incurred by authors due to illegal copying of their works. This model, designed in a completely “analogue” reality, is completely detached from the present-day reality in which the importance of streaming services is rising.

The introduction of the smartphone tax also directly contradicts social expectations. According to the study by Social Changes, as many as 75% of Poles are against the tax, and more than half of the respondents generally believe that during an epidemic, taxation on electronics should rather be lowered than increased.

The study also directly confirms the diagnosis indicated in one of the previous paragraphs: the introduction of a tax on smartphones will lead to a decrease in demand for electronic equipment. More than half of Poles declare that the new tax will make them buy equipment less or definitely less often. Rising equipment prices will be the biggest blow to the elderly and less affluent people, who are already particularly vulnerable to digital exclusion.

To sum up, the Union of Entrepreneurs and Employers calls for the idea of the smartphone tax to be abandoned. There is still time to adjust the government’s plans to the economic reality and real social needs. The epidemic is the worst moment to introduce new taxes, especially those that would put a strain on electronic equipment availability, which is currently a particularly important category of products, necessary for online lessons or work from home. In the coming years, due to the ongoing digitisation processes (also in such aspects as the functioning of the state, for example healthcare), it is necessary to consistently nurture the public’s digital competences. The smartphone tax, on the other hand, will lead to a further digital exclusion of the most vulnerable social groups. Therefore, we consider it justified to abandon this idea.

 

See more: 12.03.2021 Commentary of the Union of Entrepreneurs and Employers regarding the smartphone tax

 

Fot. JESHOOTS-com / Pixabay.com

Warsaw, 18^th March 2021

 

Position of the Union of Entrepreneurs and Employers
on the European Pillar of Social Rights Action Plan

 

On 4^th March 2021, the European Commission presented the European Pillar of Social Rights Action Plan. The European Pillar of Social Rights (EPSR) is a set of 20 principles that were announced in 2017 at the Social Summit for Fair Jobs and Growth in Gothenburg, Sweden. The a vision of Europe possessing a strong social aspect has become one of the political objectives of the European Commission under the leadership of Ursula von der Leyen. In 2020, the Union of Entrepreneurs and Employers took part in the wide-ranging public consultations conducted by the European Commission concerning the implementation of the EPSR. The Action Plan builds on the results of these consultations as well as is intended to be the Commission’s contribution to the next Social Summit to be held in May 2021 in Porto, Portugal. The position of the Union of Entrepreneurs and Employers on the EPSR Action Plan is presented below.

The non-binding nature of EPSR and legislative proposals

The Union of Entrepreneurs and Employers has consistently been reminding all parties involved that the European Pillar of Social Rights is not a legal act, but merely a non-binding political declaration, which, according to some, is designed to provide an impetus to the development of legislative initiatives on social rights within the EU. Nevertheless, the provisions of the EFPS themselves exclude such a possibility. Recital 18 of the EPSR makes it clear that “[a]t Union level, the European Pillar of Social Rights does not entail an extension of the Union’s powers and tasks as conferred by the Treaties. It should be implemented within the limits of those powers”, while recital 19 states that “(…) the establishment of the European Pillar of Social Rights does not affect the right of Member States to define the fundamental principles of their social security systems and manage their public finances, and must not significantly affect the financial equilibrium thereof”.

The non-binding nature of EFPS was then confirmed by the European Commission in a document accompanying the Action Plan [1]. It is rather noteworthy that the issue of the non-binding nature of the EPSR was raised by 8 other employers’ organisations from all over Europe. Apart from the Union of Entrepreneurs and Employers – ZPP, these were the Danish Chamber of Commerce – Dansk Erhverv, the Confederation of German Employers’ Associations – BDA, Federation of Belgian Enterprises – VBO-FEB, the German Federation of Chemical Employers’ Associations – BAVC, the Federation of German Employers’ Associations in the Metal and Electrical Engineering Industries Gesamtmetall, the Association of Swedish Engineering Industries – Teknikföretagen, and CEEMET – the European employers’ organisation representing the interests of the Metal, Engineering and Technology-based (MET) industries.

This argument is reflected again in the disinclination with which certain EU member states refer to the plans to submit legislative proposals as part of the EPSR implementation. During the consultations carried out by the Commission, Sweden, Hungary, Austria and Estonia did not support the use of legislative measures [2]. Furthermore, the Czech Republic, Denmark and Malta expressed their conviction that the main channels for implementing the EPSR ought to be the following: the European Semester, EU funding instruments, and the open method of coordination.

The employers’ organisations presented a similar position. The European Commission observed that ZPP, Gesamtmetall, CEEMET, the Confederation of Swedish Enterprise – Svenskt Näringsliv, and the European Chemical Employers Group – ECEG, are “generally opposed to further legislative action at EU level in the field of social policy” [3]. Moreover, Belgian employers added that recent legislative initiatives in the field of social policy did not sufficiently take into account the different starting points between individual member states [4].

Considering the above-mentioned arguments, it should be concluded that the EPSR does not entail the expansion of the EU’s powers in the field of social policy, and its implementation ought to be based on non-binding initiatives and should make use of existing tools such as the European Semester. We welcome the fact that the measures to implement the EPSR presented by the European Commission are largely based on non-legislative instruments (including the objectives set by the Pillar or measures to improve the quality of internships). At the same time, we see that the Action Plan contains several proposals to present legislative motions, which we evaluate negatively and as exceeding the powers of EU institutions – the European Minimum Wage Directive, in particular.

Objectives set by the Pillar

The EPSR Action Plan sets three objectives for the EU to achieved by 2030.

First, at least 78% of people aged 20-64 should be employed. Until Q3 of 2020, the average employment in the EU amounted to 78.3% for men and 66.6% for women. As part of the set target, the EU plans to reduce the employment gap between women and men by at least a half, to increase the provision of early childhood education and childcare, as well as to reduce the share of young people not in employment, education or training (known as NEETs) aged 15-29 from 12.6% (2019) to 9% by improving their employment prospects.

Secondly, at least 60% of all adults should attend training every year. This action encompasses increasing the knowledge of basic digital skills of people aged 16-74 in particular to at least 80%. Notably, until 2016, only 37% of adults participated in learning activities each year. These objectives are based on the targets set in the European Skills Agenda for Europe, the Council Recommendation on Vocational Education and Training, and the Council Resolution on the European Education Area.

Third, the number of people at risk of poverty or social exclusion should decrease by at least 15 million. In the EU, around 91 million people were at risk of poverty or social exclusion in 2019. The COVID-19 pandemic is expected to aggravate this situation. The Commission does not provide details concerning the plans to achieve the third objective.

As noted by the European Commission in the results of the consultation, ZPP together with other entrepreneurs unions called for measures to implement the EPSR to stimulate structural reforms and not to limit the ability of enterprises, in particular SMEs, to create jobs [5]. Therefore, we welcome the fact that the European Commission has placed emphasis on increasing employment and the skills of Europeans with use of existing instruments. At the same time, we noticed that as part of the fight against poverty and social exclusion, no details have been presented that would allow for a substantive evaluation of this aspect of Action Plan to implement the EPSR.

Better and more jobs

The next part of the Action Plan is dedicated to creating more and better jobs. At the outset, the European Commission notes that maintaining and creating new jobs in the era of the coronavirus pandemic is issue of paramount importance for the EU. On the other hand, when it comes to the recovery period, the Commission presents a series of measures aimed at promoting employment, creating new jobs, and facilitating job transitions, especially in those growing rapidly, such as the digital or green sectors. Therefore, the Commission will:

• review the Council Recommendation on a Quality Framework for Traineeships, principally in terms working conditions;
• update the industrial policy for Europe, basing on the results of the implementation of the new 2020 industrial strategy and lessons learnt from the pandemic;
• adopt a social economy action plan for Q4 2021;
• evaluate the experience with the Temporary Support to Mitigate Unemployment Risks in an Emergency (SURE).

Although at the rhetorical level, the European Commission declares its willingness to undertake a number of actions aimed at increasing the quantity and quality of jobs, we are concerned that the EC’s actions may ultimately focus on raising social standards, which will not be followed by the increase in productivity and competitiveness of the European economy – on the contrary, both will deteriorate as a result. Raising social standards has virtually no chances of success if separated from economic realities, and the EU should take steps to address the decline in the competitiveness of the European economy vis-à-vis partners from other parts of the world.

A sine qua non condition for the well-being of Europeans is to strengthen European economy. The growing power of China threatens the current position of the European Union as well as that of the United States. To meet this challenge, American and European authorities are responding by creating strategic programmes and increasing public funding. Various economies are now being stimulated through political planning, despite evidence that excessive state intervention leads to misallocation of resources in the economy. Thus the values that led the West to prosperity are being forgotten – from innovation via freedom of entrepreneurship to responsibility for oneself. In our view, maintaining the “European way of life” requires a comeback to European values, rather than emulating Chinese-style central planning. Opening up markets, along with unlocking entrepreneurship and creativity will allow us to take advantage of the opportunities offered by IT and technological revolution. Therefore, we call for the creation of new burdens to be abandoned, and the regulatory environment for entrepreneurs to be improved, as well as to focus on facing economic and technological challenges. Rebuilding Europe’s economic position will increase the prosperity of Europeans and help raise social standards naturally, rather than putting pressure on entrepreneurs and reducing competitiveness.

Referring to individual proposals, the Union of Entrepreneurs and Employers takes note that:

• improving the quality of internships is necessary and indispensable, but one should focus mainly on increasing the level of skills acquired by interns;
• updating industrial policy should take into account the issue of access to critical resources and enhancing the innovativeness and competitiveness of the European economy;
• presenting an action plan for the social economy constitutes a threat of violating the division of competences in social matters enshrined in the Treaties, just as the Action Plan does for the implementation of the Pillar;
• European programmes in the post-pandemic recovery period should focus on creating the jobs of the future.

Adaptation of labour standards to the future needs of the labour market

The third part of the Action Plan was dedicated to adjusting labour standards to the future of the labour market.

We fully support the proposal presented by the Commission to reduce labour taxation. Excessive overheads on work are a source of problems related to social exclusion resulting from the inability to obtain formal employment. In its recent proposal, ZPP proposed to abolish the minimum wage requirements for the smallest entrepreneurs in order to make the labour market more flexible.

At the same time, we must oppose the proposal to introduce a European minimum wage. The drafted directive will lead to a reduction in labour market flexibility and will deepen social exclusion. Setting a minimum wage at national level is detrimental to people in low-paid jobs, especially in smaller towns, and can effectively deprive such people of access to legal work. Raising burdens on work also intensifies the phenomenon of arbitration in the labour market, depriving an increasing number of people of the possibility of exercising the rights that would be theirs under the Labour Code.

We also believe that the European Commission does not have the power to regulate wages. Article 153 of the Treaty on the Functioning of the European Union (TFEU) is the standard legal basis for EU action in the field of social policy. Art. 153 sec. 1 lists a number of areas in which the EU can support and supplement the actions of member states, one of which is listed under letter (b): “working conditions”. However, a clear exception to the EU’s social competences is given in Art. 153 sec. 5 TFEU: “[t]he provisions of this Article shall not apply to pay”. And as one can observe, Art. 153 sec. 5 TFEU does not mention the direct impact on the level of remuneration, but explicitly states that the EU institutions have no competence in this area, both directly and indirectly. This means that the Treaties clearly and literally exclude EU action in the field of wages, and the proposed Directive is an example of exceeding the competences and ignoring EU law by the European Commission.

Moreover, we note that the draft directive has received criticism from the Scandinavian countries as it will weaken their collective bargaining system. The issue of minimum wages is regulated differently in each member state. Countries such as Denmark and Sweden boast a long tradition and a well-developed system of collective bargaining. This is illustrated by the fact that despite the lack of a statutorily regulated minimum wage, these countries have some of the best social standards in Europe. The Minimum Wage Directive may undermine this system and lead to a lowering of standards, and is therefore undesired.

We are also concerned about the subsequent proposals of the European Commission. The third part of the Action Plan assumes that in Q4 2021, the European Commission will submit a legislative proposal on the working conditions of people working via online platforms and will present an initiative to ensure that EU competition law does not prevent the conclusion of collective agreements on (some) self-employed people. With regard to the regulation of platform employees, in the opinion of ZPP, such regulation is undesired, as it will further limit what little flexibility there is on the labour market and it may encounter serious legal problems related to, among other things, the definition of an employee and the differences in the legal status of platform employees in different member states. For example, according to recent rulings, a court in the Netherlands classified Deliveroo employees as full-time employees, while an Italian court – as self-employed.

In the discussion on the regulation of platforms, one must not forget their economic aspect. According to the currently prevailing discourse, regulatory barriers can strengthen the EU’s global position, as they will force other regions to adopt European values. This approach has proven unsuccessful in the case of China, where economic growth was not followed by the respect for the rule of law or human rights. There is no reason to expect this to change in the future. Furthermore, we see the practical difficulties that may be associated with the introduction of collective agreements for some self-employed workers. First of all, it seems difficult to define the target group of such regulation. Secondly, after a successful process of defining criteria for selecting such self-employed workers, the same criteria can be used by national tax offices to prove to these entrepreneurs that they have an employment relationship with their main or sole client and therefore should pay higher health or social insurance contributions.

Employee mobility

In the field of employee mobility, the European Commission proposes to cooperate with the European Labour Authority to properly implement and enforce EU rules on employee mobility, to create better information and labour inspection capabilities at a national level, and to protect mobile workers, including seasonal workers. In our opinion, the measures proposed by the European Commission are insufficient and should be extended to include an analysis of the impact of the Mobility Package on employee mobility, job availability, competitiveness of the European economy as well as the implementation of the European Green Deal objectives. A recent report by the Commission touched upon the environmental impact of two provisions from the mobility package: the obligation to return the truck to base every 4 weeks and the reduction of cabotage quotas [6]. According to this report these provisions will lead to the emission of an additional 3.3 million tonnes of carbon dioxide (comparable to a year’s worth of total transport CO₂ emissions in Estonia) and an increase in transport emissions by approx. 5%. With this in mind, ZPP encourages the Commission to expand the scope of its planned activities in the field of employee mobility.

Investments in skills and education to provide new opportunities for all

With reference to the part of the Action Plan dedicated to investment in skills, the Commission will:

• propose a higher education transformation plan in Q4 2021 to unlock the full potential of tertiary education institutions in the scope of reconstruction towards a sustainable, inclusive, green and digital transformation;
• propose a personalised training account initiative in Q4 2021 to overcome barriers to access to trainings and enable adults to manage their career changes;
• propose in Q4 2021 a European approach to micro-qualifications to support flexible learning pathways and labour market flows;
• propose a skills and talent package in Q4 2021, including a revision of the Long-term Residents Directive (Directive 2003/109) to establish true long-term resident status in the EU, a revision of the Single Permit Directive (Directive 2011/98) to simplify and clarify its scope (including admission and residence conditions for low- and medium-skilled workers) as well as to identify options for developing an EU talent pool for qualified third-country workers.

The Union of Entrepreneurs and Employers welcomes the proposed proposals aimed at investing in skills, the simplification of procedures, and the use of the talent pool of third-country workers. At the same time, ZPP notes that in the times of Brexit, the number of EU institutions ranked globally among the very best universities has significantly decreased. Scientific centres at the highest world level play a key role in fostering innovation in the economy. Therefore, ZPP calls for the extension of the Action Plan related to tertiary education to support the best universities, so that, in the next few years, European universities and Europeans can be at the forefront of science.

Building a Union of equality

Along with this Action Plan, the Commission presented a motion proposing a directive to strengthen the application of the principle of equal pay regardless of gender for equal work or work of equal value through pay transparency measures and enforcement mechanisms. Although the provisions of the proposed directive do not undermine the principle of pay secrecy, in the case of small companies, where the same position is occupied by, for example, two people, they may in fact lead to pay secrecy violation. In some member states, it is an important principle and legislation promoting equal pay should be designed so as not to violate it.

Summary

From the above analysis, we can draw several basic conclusions. First of all, the EPSR remains a non-binding political declaration which cannot lead to an extension of the powers of EU institutions in the field of social policy. Therefore, in order to implement the Pillar, ZPP advocates the use of non-binding and existing instruments.

Secondly, ZPP welcomes the emphasis in the Action Plan on job creation and investment in skills. From our perspective, achieving the ambitious goals of social policy is impossible without improving the competitiveness of European economy, which will not happen without increased productivity, and therefore without better skills and more jobs. At the same time, we are concerned about the possibility of a rhetorical use of the postulates of creating better-quality jobs for the purposes of raising social standards, which would not be followed by productivity growth.

Third, making the labour market more flexible is crucial for restoring the competitiveness of the EU economy and the well-being of Europeans. On the one hand, we support the European Commission’s proposal to reduce taxes on labour. On the other hand, we strongly oppose the idea of introducing a European minimum wage or regulating platforms in such a way that labour surcharges would be increased.

Fourth, we note that any action taken at the EU level should primarily respect the national traditions and laws of individual member states. We therefore oppose the plans to introduce a European minimum wage as lowering the standards of collective bargaining in some member states. Moreover, we see that the directive aimed at strengthening the application of the principle of equal pay for male and female workers may lead to a de facto violation of the principle of pay secrecy.

Lastly, we emphasise that the strengthening of the European economy is a sine qua non condition for the well-being of Europeans. In response to China’s growing power, the EU is increasingly interfering in the economy and distancing itself from the values that had built its position – innovation, freedom, entrepreneurship and responsibility for oneself. In our view, the “European way of life” requires a return to European values, rather than following the Chinese model. Unlocking the potential of entrepreneurship will increase Europe’s prosperity and lead to a natural rise in social standards. On the other hand, the path of adding burdens that the EU is currently following is putting pressure on entrepreneurs and leading us to decreasing competitiveness at a key moment in a post-pandemic recovery.

***

[1] https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52021SC0046&from=EN page 9.

[2] Ibid., page 45.

[3] https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52021SC0046&from=EN page 44.

[4] Ibid.

[5] https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52021SC0046&from=EN page 11.

[6] https://ec.europa.eu/transport/modes/road/news/2021-02-mobility-package-i-studies_en

 

See document: 18.03.2021 Position of the Union of Entrepreneurs and Employers on the European Pillar of Social Rights Action Plan 

 

Fot. NakNakNak / pixabay.com

1^st March 2021

The Union submitted to the Ministry of Development, Labour and Technology a package of 50 proposals of amendments to aid companies

The Union of Entrepreneurs and Employers took part in consultations organised by the Ministry of Development, Labour and Technology. The consultations concerned proposed changes to legal provisions in force which would improve the regulatory environment for companies.

Following the analyses with members of our Union, we managed to come up with, formulate, and submit 50 specific proposals of changes to be introduced to enforced regulations that could become part of another “package deregulation” act. The ideas presented in the document concern various areas of law – from tax regulations, through labour law, to regulations pertaining strictly to one given industry.

We hope that the changes we submitted will prove helpful in carrying out one of the key missions of the Ministry of Development, Labour and Technology, which is to create a friendly legal environment for entrepreneurship in Poland.

To access the entirety of submitted proposals click the following link:

01.03.2021 Contribution of the Union of Entrepreneurs and Employers to consultations with the Ministry of Development, Labour and Technology – 50 proposals of changes to aid companies

Warsaw, 2^nd March2021

Study: Poles against smartphone tax

As many as three-quarters of respondents are against extending the reprographic fee to laptops, desktop computers, tablets, TV sets and smartphones. Works on such a project are ongoing at the Polish Ministry of Culture. The survey also shows that almost 9 out of 10 Poles consider this fee an additional tax, and more than half of all respondents believe that the state in times of a pandemic should be reducing taxes on electronic appliances.

The reprographic fee is added to the price of electronic equipment and is later transferred to organisations responsible for collective management of copyright or related rights, such as the Polish Society of Authors and Composers ZAiKS. The Ministry of Culture and National Heritage is working on a draft act which is to cover with the aforementioned fee smartphones, tablets, TVs and computers, to name just a few. Its rate can be as high as 6%, which will translate into an increase in equipment prices by even as much as PLN 300-600. As many as 75% of people who participated in the survey conducted by Social Changes at the turn of January and February this year are against such a solution.

“Many Poles are forced to undertake unplanned expenses. Therefore, the introduction of yet another tax that will increase the prices of devices currently necessary for work and study is completely incomprehensible,” claims Michał Kanownik, President of ZIPSEE Digital Poland, and adds: “The introduction of the smartphone tax will be a blow not only to consumers, but also Polish importers and distributors of electronics. These companies employ tens of thousands of people. An additional levy will certainly affect their ability to compete with foreign companies.”

The conducted survey clearly shows that as many as 86% of Poles believe that the new fee is a form of tax. Moreover, more than half (54% of respondents) believe that during a pandemic, the state should be lowering taxation of electronics, not the other way round. The more so, as only 1 in 4 Poles have bought new equipment as a result of the pandemic.

“It is always better to prevent a disease rather than to treat it later. Due to the fact that for many months there has been an ongoing debate regarding the proposal to extend the reprographic fee, known as the smartphone tax, we decided to check what Poles think about this solution. Introducing this additional burden will, on the one hand, be a blow to consumers, and on the other hand, Polish entrepreneurs. Suffice to say, one of the few industries where Polish entities have achieved a leading position. This proposed tax has no social acceptance. Therefore, we believe that there is still time to withdraw from it,” says Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers.

According to the survey, 54% of Poles declare that after the introduction of the fee, they will buy equipment less often (24%) or much less often (30%). The negative effects of the fee will be most severe in case of the elderly (33%) who are already the group most exposed to digital exclusion today.

“Looking at these results, I can say that Poles understand well how taxes or para-taxes affect prices. Neither do they fall for linguistic tricks that if we call something a fee instead of a tax that it will not affect the price,” emphasises Andrzej Przybyło, CEO of the Lower Silesian AB Group, the largest electronics distributor in Central and Eastern Europe. “According to Eurostat, electronics in Poland are currently the cheapest in Europe. When the new tax is introduced, they will become the most expensive. Meanwhile, I have recently read that the Ministry of Culture is not worried about this state of affairs, because they assume that Poles will buy new equipment in Germany in prices in Poland are too high. All any Polish entrepreneur can say is ‘no comments’,” he adds.

The survey also checked how respondents evaluate their economic situation during the pandemic. As many as 4 out of 10 people feel it has deteriorated, of which every tenth person believes that their situation worsened significantly. Most people (58%) are aware of prices going up and increased costs of living compared to times before the pandemic. Only every third respondent is of the opinion that the costs of living have remained the same, and only 9% that they have become lower.

At the same time, nearly two-thirds of respondents believe that some people or certain industries ought to be supported as part of anti-crisis aid: food services, tourism, sports and recreation in particular.

As many as 91% of respondents are against the retirement privilege for artists. This may mean that the pandemic is not really a good time to implement ideas of this kind. Furthermore, systemic solutions that have not been preceded by a broad public debate are even more unacceptable.

“A representative group of over 2,000 people participated in our study. Unequivocally, it shows that respondents are against the introduction of another fee, which will mean an increase in prices. Moreover, many people declared that due to the pandemic, they had to invest in new equipment. This especially concerns students or parents of young and adolescent children. The introduction of a new fee will cause the vast majority of Poles to limit their shopping or abandon the idea entirely. Senior respondents paid particular attention to this aspect – this may have a negative impact on them and end up in digital exclusion,” says Marek Grabowski, President of Social Changes research centre.

The study was conducted on the online panel using the CAWI method in the period 29^th January – 2^nd February 2021. The nationwide sample N=2240 comprised people aged 18 and over. The structure of the sample was designed to reflect the population in terms of gender, age and place of residence.

Warsaw, 2^nd March 2021

 

16 adrenaline shots to a full recovery: the Union and WEI have a plan for the Polish economy

 

In 2020, the rate of investment within the Polish economy amounted to 17.1%, compared to 18.5% in 2019. This comes as a result of not only the pandemic, but also of the diminishing attractiveness of investing in Poland – a recent ongoing trend. The Union of Entrepreneurs and Employers and the Warsaw Enterprise Institute have published a comprehensive programme of reforms that will reverse this trend and subsequently lead to faster national income growth.

The Union together with the Institute encourage all interested parties to have a look at their new publication, and to watch the expert debate dedicated to the issues it analyses. The debate will take place on Wednesday 3^rd March 2021 at noon and will be broadcast live on social media of Związek Przedsiębiorców i Pracodawców (the Union) and the Warsaw Enterprise Institute.

As part of the “Plan for an economic recovery after the Covid-19 crisis”, both organisations outline 9 pillars which are to constitute basis for reforms. Of particular significance in the short term is the first pillar: it lists as many as 16 solutions that can be introduced immediately. Their effect on the economy will be identical to that of an adrenaline shot on an exhausted organism. These “shots” include, among others: a guarantee of legislative stability, freezing the raise of the minimum wage, ceasing to regulate market prices, withdrawing from amendments to non-interest costs of consumer loans, or the suspension of the bank tax collection. The last of the proposed solutions is exceptionally important as this tax, combined with low interest rates, creates a savings-unfriendly environment, while savings are the foundation of any investment.

Other pillars:

II Universal access to high-speed Internet – the pandemic has shown that a good infrastructure in terms of connection of the Internet is a prerequisite for development in the 21^st century. We propose ways to further develop its potential.

III Public services in the era of universal Internet access – many public services have already been successfully digitised, however, much still remains to be done in this respect. We suggest the right directions of development.

IV Economic law – a good and transparent economic law is a sine qua non condition for stable GDP growth. We design systemic solutions streamlining legislation in this area.

V Salaries and taxes – in the case of these two issues that are of interest to everyone, there is still much to be done. We propose solutions that increase budget revenues and salaries of the Polish people alike.

VI Pension system – we diagnose the current system of insurance and supply, and propose a new supply system that addresses demographic changes.

VII Demography – we conduct an in-depth analysis of demographic problems and indicate methods of alleviating them, including the usefulness of the revenue tax to combat this issue.

VIII Labour law and labour market environment – the labour law presently in force satisfies neither employers nor employees. Furthermore, it fails to address the challenges of the 21^st century. We propose several necessary amendments to this legal act.

IX Judiciary – courts that are efficient and just are no controversial utopia. Nevertheless, in order to a fully achieve this ideal in Poland, a structural and, to a certain extent, revolutionary reform is necessary.

The pandemic will eventually end, but reforms needed to switch the Polish economy to a higher gear must take place now. They will give Poland the chance to accelerate the process of catching up with the wealthier economies of Western Europe. Poland, being a smaller and younger free-market economy than, for example, the Germany or France, has the advantage of being more agile and flexible. We should use this to our advantage.

 

Fot. suriyapong / Adobe Stock

Warsaw, 18^th February 2021

 

Position of the Union of Entrepreneurs and Employers on the advertising tax

 

The Union of Entrepreneurs and Employers is critical of the proposal to introduce the advertising tax and calls for further works on the project to be abandoned. Our motivation is two-fold and consists of the following key factors: we are against sectoral taxes as well as oppose the introduction of any additional burdens during an epidemic or over the course of economic recovery. Meanwhile, the proposed tax would be another new fiscal obligation for companies, introduced in a relatively short time, in spite of the first economic recession in Poland in thirty years.

First of all, we would like to address to the very title of the act itself and the terminology used within. For we are dealing here with yet another case of introducing a new tax without actually calling it a tax. Recently, the “sugar levy” and the “solidarity tribute” had been adopted – this time the new tax was called the “advertising premium”. There can be no doubt whatsoever that the purpose of all the above-mentioned taxes is of a fiscal nature, even if the revenues from these taxes, in theory, are not transferred directly to the national budget, but to individual funds. The proceeds that end up in the National Health Fund support the state budget, as they effectively reduce the necessary subsidies from the budget to the Health Fund. Revenue directed to other funds lessens the pressure on the budget in the areas covered by those funds. The creation of such a structure leads to a real, gradual increase in burdens imposed on Polish citizens (the solidarity tribute is a direct blow to personal income; other taxes are easily passed on to consumers too). Consistent avoidance of calling these taxes by name, raises the suspicion that it is the government’s aim to keep the public opinion convinced that there are no new burdens – a deleterious practice and we as the Union evaluate it unequivocally negatively.

The mode how the draft act is being processed also raises our doubts. At the moment, it is in the “pre-consultation” phase, which is a welcome practice in the case of predictable, exemplary legislative processes. As a rule, however, the subject of a pre-consultation is a document discussing the assumptions of an act, presenting key concepts and intentions of the legislator. Meanwhile, as part of the currently ongoing pre-consultation, opinions are already being given to a specific draft legal act along with an explanatory memorandum. Moreover, one should note that the presented act concerns an exceptionally wide group of entities, both representatives of traditional media and digital platforms or producers (and therefore advertisers) of products considered to be qualified goods. Nevertheless, as part of the pre-consultation, there are only 14 days provided for comments. It would be reasonable for the Ministry of Finance to clearly indicate the further legislative path envisaged for the discussed draft act. If no decision is taken to withdraw from further works, it seems most appropriate to apply the government legislative process and regular public consultations, then prepare a report in which the authors would address the comments and organise a consensus conference with all interested parties. This is the only way one can conceive of a reliable legislative process relating to a draft act of such a broad scope.

As we have mentioned at the beginning, the Union of Entrepreneurs and Employers is against sectoral taxes. We do not at all understand why the legislator chose to impose this new particular levy on the (very broadly understood) advertising industry. Nowhere in the explanatory memorandum to the draft act is the selection of companies to become taxpayers of the new tax backed by argument. This is all the more surprising as, for example, the outdoor advertising sector has experienced a decline in revenues of several dozen percent as a result of the pandemic. Small and medium-sized companies in this industry may not survive additional burdens, especially in the context of a gradually declining market share and a high share of fixed costs in budgets (for instance, long-term lease contracts for outdoor advertising purposes with specific amounts and rates). Similar problems can be noticed, for example, on the television advertising market, where smaller broadcasters may particularly be affected by this new tax, as their revenues are mainly based on advertising.

No justification was also provided in the case of “qualified goods”, the advertising of which is to be subject to a higher tax rate. Merely in the communique accompanying the published draft act, together with the explanatory memorandum, one can find a piece of information that the higher rate will apply to revenues from advertising of goods that are “detrimental to one’s health”. This is a surprising criterion, largely due to the products to which it is to apply. Beverages containing sweeteners are already subject to the sugar tax, the proceeds of which, in accordance with that act, contribute mostly to the National Health Fund. Only in January 2021, beverage producers paid sugar tax to the Fund in the amount of several dozen million zlotys. Therefore, the proposal to re-cover them with an additional levy, also contributing to the National Health Fund, is unacceptable and in practice leads to multiple taxation of the same products.

Similarly, it is difficult to find a rational justification to support the selection of products that are “detrimental to one’s health”, and the authors of the project themselves are far from helpful in this matter, as one can find medicine and dietary supplements there too. The conclusion that medicinal products (legally approved to be sold and purchased) or dietary supplements (subject to registration procedures and supervision of the Chief Sanitary Inspectorate) are goods that are harmful to one’s health is impermissible and devoid of any substantive basis. With regard to the presented catalogue of qualified goods, it is possible to raise the issue of unequal treatment of entities operating on the market by discriminatory and arbitrary justification bereft of substance, by means of higher rates of advertising revenues for certain products.

What is also noteworthy are the (in all probability, unintended) other side effects of the approach proposed by the legislator. Having analysed the structure of the agri-food market, we can claim, for example, that the solutions presented, by leading to an increase in advertising costs, will in a way of their own hamper the competitiveness of branded products compared to products sold under private labels of stores.

Following up on our arguments regarding the sectoral character of the proposed tax, it is impossible not to mention the excerpts of the draft that resemble the assumptions found in the previously proposed so-called digital tax. The Union of Entrepreneurs and Employers had already addressed this concept many a time and our position on this matter has remained unchanged. We believe that there is no rational reason to additionally burden an arbitrarily selected sector of the economy. Especially since there is no evidence that tax avoidance is more commonplace or severe among digital companies than within “traditional” sectors of the economy. Furthermore, one could make an effort to try and justify the argument (basing on publicly accessible data of the Ministry of Finance) that regarding the generated income, some global digital companies pay CIT in amounts even several times higher than the average Polish taxpayers.

Regarding the section of the project on online advertising, a number of aspects specific to this area should also be discussed. In the draft, advertising services rendered on the Internet are vaguely defined as “any digital services relevant to advertisement targeting”. It is an exceptionally broad and capacious description. It would be difficult to precisely determine the scope of digital services related to targeting an advertisement to recipients, let alone determine which of them are “relevant” for the targeting process. Such a definition may make the correct application of the regulation impossible. What raises further doubts is the proposed mechanism of identifying advertising recipients, which would require both taxpayers and tax authorities to process enormous amounts of data, often imprecise and in certain cases (as of now) not at all aggregated. This is another aspect of the regulation that may generate key interpretation disputes that would make its correct application extremely difficult or even impossible.

To summarise the argumentation stated above, tax optimisation schemes and CIT avoidance are common phenomena in a globalised economy and do not relate to any specific sector. If the legislator has observed a problem (one that is actually real) with the structure of the corporate income tax, we propose to consider an initiative in the field of a universal revenue tax that is difficult to avoid.

Ultimately, the project is to introduce an additional burden in the course the fiscal year. Moreover, during a pandemic. Entrepreneurs are once again surprised by a proposal to introduce a new type of levy – as a result, the principle of trust in the state and its laws seems to have been severely violated. Most OECD countries decide to reduce the fiscal burdens during the current pandemic. We have observed with growing concern that the Polish legislator, contrary to this universal trend, would rather aim at the introduction of novel taxes, while simply refusing to call them as such. All in all however, contrary to the claims made in explanatory memoranda and various announcements, the economic cost of all these new burdens will in practice be borne by consumers. Therefore, the purchasing power of wages and the financial situation of households are both going to deteriorate – all this during an epidemic that made the unemployment rate soar to 6.5%.

Furthermore, the short vacatio legis deserves to be strongly criticised. The proposal that the new burden should enter into force later this year, as early as July, is unacceptable.

To sum up, the Union of Entrepreneurs and Employers calls for the works on the new tax to be abandoned. We oppose the introduction of any sectoral burdens, and proposing new taxes during an epidemic is both contrary to our concept of counteracting its negative economic effects as well as stands in opposition to the practices of most OECD countries. Besides, the proposed solutions are discriminatory against specific categories of economic entities. We are open to a discussion about tightening the tax system and we have our own idea how to do it: a universal revenue tax. However, we are against a burden, introduced in an ad hoc manner, on arbitrarily selected sectors, under the misleading banner of “premiums” to support healthcare, culture or protection of historic monuments. Especially since the costs of the new advertising tax will easily be passed on to producers (sometimes of key categories of goods, such as food or medicines), and later to consumers. As with any increase in burdens, its effect will therefore be prices going up and the purchasing power of households going down.

 

See more: 18.02.2021 Position of the Union of Entrepreneurs and Employers on the advertising tax

Warsaw, 25^th February 2021

 

Social partners call to open up the economy while maintaining sanitary regime

 

Organisations of employees and employers, members of the Social Dialogue Council, are calling for the remaining sectors of the economy that remain in the state of lockdown to be opened. At the same time, we call for the implementation of sanitary restrictions adequate to the nature of individual industries. Employees and employers alike are willing to follow the sanitary regime worked out in past months.

The hitherto conduct of both employees and entrepreneurs in times of the COVID-19 epidemic proves that representatives of all industries are able to run their operations at full speed in a prudent manner and taking into account the current state of the epidemic. Recent days have shown that there are no violations of the sanitary regime within industries unlocked in mid-February this year. There are no substantive grounds to differentiate the situation of employees and entrepreneurs from particular industries or sectors.

Decisions consisting merely in restricting business operations of enterprises weaken the Polish economy, which is largely made up of small family businesses. No form of administrative support will replace the entrepreneurs’ relations with their employees, contractors, and consumers – the basis of life in social and economic terms. Therefore, each subsequent day of restrictions is causing irreversible changes. The progressing economic stagnation will result in an increase in unemployment, a spiralling debt of companies, and their subsequent bankruptcies.

For this reason, we call for reason and ask that all employees and companies be allowed to operate on an equal and fair basis. We are ready to act jointly and responsibly, while maintaining all measures whose purpose is to control the scale of the epidemic.

 

See more: Social partners from the Social Dialogue Council call to open up the economy while maintaining sanitary regime

 

fot. Álvaro Serrano / Unsplash

Warsaw, 24^th February 2021

 

EESC Activities Report no. 1/21

Marcin Nowacki, President of the European Enterprise Alliance and Vice-President of the Union of Entrepreneurs and Employers, and Tomasz Wróblewski, President of the Warsaw Enterprise Institute, are members of the European Economic and Social Committee (EESC), an EU advisory body which represents employers’ and employees’ organisations in the EU lawmaking process. We present a summary of their activities in January 2021.

On 27 January, a debate with Maroš Šefčovič, Vice-President of the European Commission responsible for interinstitutional relations and forecasting took place. Šefčovič presented the Commission’s work programme for 2021. Marcin Nowacki raised the issue of passing on the burden of the digital tax on to consumers and SMEs. He asked Šefčovič whether the Commission foresees any measures to evaluate the cost of digital regulations.

In addition, Nowacki raised the question of logistical and legal challenges related to the carbon adjustment border mechanism. He noted that the design of the levy essentially requires a determination of the carbon emissions associated with each product, and asked whether the Commission is prepared for the difficulties arising from disclosing the details of supply chains.

Also on 27 January, a meeting took place with António Costa, Prime Minister of Portugal, who presented the priorities of the current Presidency of the European Council. Tomasz Wróbleski inquired about the legitimacy of ambitious social goals during the economic crisis caused by the coronavirus pandemic.

 Regulatory activity

 EESC members are also active in the regulatory field. The EESC issues opinions on subjects referred to it by the EU institutions. In addition, EESC members can propose the adoption of own-initiative opinions.

Marcin Nowacki has become rapporteur for the EESC opinion on the EU Strategy to harness the potential of offshore renewable energy for a climate neutral future, prepared by the Section for Transport, Energy, Infrastructure and the Information Society (TEN). The Offshore Strategy defines EU priorities for the next 30 years and sets very ambitious targets, according to which the share of offshore wind energy in the EU energy mix in 2050 will exceed 16%.

Useful links:

1. Overcoming the COVID-19 pandemic permanently, as well as the economic recovery;
2. The EU Strategy to harness the potential of offshore renewable energy for a climate neutral future

Additionally, Mr Nowacki tabled three own-initiative opinion proposals. The first opinion proposal concerns support and cooperation of the European Union with Belarusian entrepreneurs, workers and civil society. It aims to provide an expert assessment of the current situation in Belarus from the perspective of civil society and the expectations of Belarusians regarding the actions of the European Union. It could help the relevant EU institutions decide how best to target and direct EU support and, in the long term, lay the foundations for future EU-Belarus relations.

The second proposal for an opinion is related to the assessment of the integration process in light of the Association Agreement between the European Union and Ukraine. The aim of the opinion is to formulate practical recommendations that will bring the views of civil society closer and help the EU institutions to increase the effectiveness of the EU-Ukraine Association Agreement. 

The third proposed Opinion is to assess the impact of the Nord Stream 2 project on the Energy Union. The opinion will gather stakeholder views on the impact of the Nord Stream 2 gas pipeline on the EU’s energy security.

More information about the EESC

What is EESC?

The European Economic and Social Committee (EESC) is an EU advisory body comprising representatives of employers’ and workers’ organisations and other interest groups. It issues opinions on EU issues to the European Commission, the Council of the EU and the European Parliament, thus acting as a bridge between the EU’s decision-making institutions and EU citizens.

What does the EESC do?

It gives the interest groups a formal say on EU legislative proposals. Its three key tasks are to:

• Ensure that EU policy and law are reflect to economic and social conditions in the Member States.
• Engage in dialogue with employers’ and workers’ organizations from all member states.
• Promote European integration and participatory democracy.

What is the EESC composition?

The EESC has 329 Members from all EU Member States, who are appointed for a renewable five-year term of office. Members are nominated by national governments and appointed by the Council of the European Union. They are independent and perform their duties in the interest of all EU citizens. The number of Members per country is in proportion to the country’s population.

How does the EESC work?

The EESC is consulted by the European Parliament, the Council of the EU and the European Commission on a variety of subjects. It also issues opinions on its own initiative.

Members work for the EU, independently of their governments. They meet 9 times a year. Opinions are adopted by a simple majority vote.

Meetings are prepared by the EESC’s specialized sections and the consultative commission on industrial change. The EESC’s specialist think-tanks (known as ‘observatories’) track the progress of EU strategies.

The EESC keeps in touch with regional and national economic and social councils throughout the EU – mainly to share information and discuss particular issues.

See more:  EESC Activities Report no. 1/21

fot. Giampaolo Squarcina / ma lic. Flickr.com

Warsaw, 9^th February 2021

 

Memorandum of the Union of Entrepreneurs and Employers:
Let us abolish the minimum wage in micro-enterprises

 

• Smallest of enterprises are hit hardest by the pandemic. The livelihood of many is at risk. Let us help them by eliminating the minimum wage in micro-enterprises.
• For the same purpose, a simple method of taxing companies generating revenues not higher than PLN 120 thousand annually should be introduced: a uniform 20% revenue tax, covering PIT and social contributions.

The Union of Entrepreneurs and Employers has repeatedly described the destructive impact on the economy of both the pandemic and the restrictions on business activity. Although the statistics are not extremely bad on the macro scale (despite the fact that the first recession in thirty years is a fact), some industries are feeling the effects of the pandemic particularly severely. As it usually happens in most cases, micro-enterprises are exposed to the highest risk of bankruptcies and layoffs. They do not have the financial reserves necessary to survive such a difficult time.

We emphasise the fact that some of the sectors subject to restrictions are to a large extent made up of the smallest of entities. Moreover, some of these companies may be excluded from the possibility of applying for key support instruments due to failure to meet certain criteria on their part (including – above all – the criterion of employment based on a contract). This is to a high degree due to the specific nature of business operations, and mainly a result of seasonality or the team being students or young people just entering the labour market. This is relatively commonplace in the services sector, and this is the exact sector that is most affected by the enforced restrictions.

We fear that the prolonged restrictions (that we have been consistently against) may lead to a collapse of the Polish microbusiness. With this in mind, we believe it to be a reasonable solution to introduce a programme aimed precisely at supporting the smallest entrepreneurs. We propose that this programme consist of at least two elements, which are presented below.

1) A return to the original concept of „small business”

Already a few years ago, the Union of Entrepreneurs and Employers designed a solution to help the smallest economic entities. For them, the obligation to pay flat-rate social security contributions, regardless of their revenue, is associated with a decrease in profitability to a point where it becomes a real challenge. Needless to say, for most entrepreneurs, the flat-rate social contribution is a favourable solution, but in case of the above-mentioned group, the necessity to pay the yearly increasing amounts is a source of real problems in staying in business.

We have proposed that entrepreneurs running a sole proprietorship on the smallest scale (revenues not exceeding several dozen thousand zlotys per year) should be able to settle accounts with the Tax Office and the Social Insurance Institution by means of a uniform, simple levy paid on revenue, including both the income tax and all due contributions.

Our postulates were somewhat reflected in the “small ZUS plus” formula (ZUS – Social Insurance Institution) introduced by the government. This relief has evolved, but even in its current, extended form, it does not take into account all the elements contained in our concept. First of all, as its name suggests, it only applies to social security contributions, while the original “small business” proposal also included income tax. The structure of the solution itself is also different – instead of a simple product of the rate and the income achieved in a given month, “small ZUS plus” requires the determination of the average monthly income from business activity, multiplying it by a factor of 0.5 and – ultimately – comparing the result with the amount of 30% minimum wage and 60% of the forecast average monthly wage.

The more complicated structure aside, the main difference between the implemented concept of “small ZUS plus” and the idea of “small business activity” presented by the Union of Entrepreneurs and Employers is the fact that the discussed relief in social insurance contributions is limited in terms of time: it can only be benefited from for three years over a five-year period.

As a result, the problem of the smallest companies generating low revenue (from which a small amount remains in the owner’s pocket having paid all due public levies) remains valid. The key advantage of the concept promoted by the Union is it being a systemic solution. Henceforth, we believe that the minimum plan is to resign from the time restriction on the “small ZUS plus”. Ultimately, one should strive to implement the original idea to regulate “small business”, so that the smallest entities can settle accounts in a simple way, and their burden is directly dependent on the revenue generated. The rate of such a tax should come up to approximately 20%. For a considerable part of the smallest enterprises, this will be a lower total burden than the cumulative amounts of social security and personal income tax contributions.

2) Minimum wage abolition in micro-enterprises

Despite the fact that the labour market has coped relatively well with the problems caused by the coronavirus epidemic, the first obvious signs of its weakening condition are already visible. Unemployment registered in January reached the level of 6.5%, the highest in several years. The number of new job offers is also gradually decreasing. In the autumn of 2020, their number was on average over 25% lower than the year before.

It might be worth to emphasise the fact of partial regionalisation of the problem of unemployment, resulting from, among others, a relatively stronger impact of the pandemic on, for example, resorts. For instance, in the Kołobrzeg poviat, the registered unemployment rate increased due to the pandemic threefold (sic!).

One also has to note that industries subject to restrictions (food services, hotels, pubs, cultural institutions etc.) are sectors in which a significant part of youth, including students, traditionally gain their first working experience. Layoffs resulting from, for example, an administrative ban on conducting business activity are a lot harsher for these employees as it is much more difficult than in normal circumstances to find an alternative job. In the world before the COVID-19 pandemic, a young person starting a career e.g. in a restaurant could easily find other employment in a bar, a cinema or a hotel, if necessary. In the new reality marked by a lockdown, their possibilities are not endless.

The conclusions stated above are increasingly often confirmed by experts who claim the coronavirus epidemic affects young people active in terms of work the most. This is an observation not limited to Poland, but valid globally, especially since most countries decided to introduce similar bans or restrictions.

Bearing in mind the arguments listed above, we believe that it is worth putting safety measures in place in order to mitigate the risks for the labour market resulting from the difficult situation caused by the pandemic. Presently, many entrepreneurs still keep jobs, contrary to the economic calculation. It will not be long, however, before ruthless calculation will force them to cut jobs, and this may rapidly affect industries whose activities are limited. As a consequence, a return to double-digit unemployment rates unseen in Poland for years is possible. In circumstance like those, it would be difficult for young (inexperienced) and low-skilled people to find employment.

To prevent this scenario from happening, we propose a bold move to be considered: the introduction of a threshold based on enterprise size, from which the minimum wage provisions would apply. To a certain degree, a similar solution exists in the United States, where the federal minimum wage regulations apply to companies with annual revenues exceeding USD 500,000. In Poland, the starting point of reference could be micro-entrepreneurs. The discussion on the threshold beyond which an entrepreneur would be bound by the provisions regulating the minimum wage, however, should remain open.

To sum up, the Union of Entrepreneurs and Employers would like to emphasise that the pandemic may lead to the collapse of micro-entrepreneurship in Poland. It is difficult to evaluate the scale of this phenomenon or its duration at this very moment, but there is no doubt that a proposal to introduce a regulatory support programme for micro-enterprises is a justified course of action in order for them to survive this difficult time and to recover after the epidemic. We believe that both concepts presented above: the return to the idea of “small business” and the exemption of the smallest of companies from the scope of the provisions regulating the minimum wage, have the potential to serve this purpose.

 

See more: 09.02.2021 Memorandum of the Union of Entrepreneurs and Employers: Let us abolish the minimum wage in micro-enterprises