Warsaw, 10^th February 2021

 

Statement of the Union of Entrepreneurs and Employers on the media tax

 

The Union of Entrepreneurs and Employers has for years been critical of all sectoral taxes. The proposed media tax is no exception from that rule, and therefore Union strongly opposes its introduction.

Furthermore, the Union opposes any and all new burdens introduced during the fight against the coronavirus epidemic. The media tax is another one of them. In our view, this is yet another reason to oppose its introduction.

By introducing sectoral taxes, the government as a rule refers to the necessity to impose burdens on those companies that apply tax optimisation schemes and, as a consequence, avoid income tax. This argument is also used to justify the idea of a tax on advertising, also known as the media tax.

If the above-specified justification actually were the legislator’s intention, the Union of Entrepreneurs and Employers wishes to remind that it has for years been proposing a real remedy to the problem of tax avoidance: a simple tax system based on a revenue tax that is difficult to avoid as well as easy to calculate and collect. A complete set of information regarding our views in this regard along with a concept of a comprehensive tax system reform are available on our website www.podatkiminus.pl.

If the state really wants to combat tax optimisation, a revenue tax should be introduced instead of adding sectoral taxes whose consequences the consumers will have to suffer.

 

See more: 10.02.2021 Statement of the Union of Entrepreneurs and Employers on the media tax

 

Fot. Tierney / Adobe Stock

Warsaw, 11^th February 2021

 

“Lockdown Loss Meter” hanged in Warsaw. What amount does it show?

 

On the façade of the Warsaw-based pub “Świetlica Wolności” (The Freedom Lounge), several screens making up the Lockdown Loss Meter were hanged. In total, since March 2020, the Polish economy has already lost over PLN 30 billion as a result of the lockdown.

The unfreezing of the economic – scheduled for 12^th February 2021 – is only partial, as it concerns cinemas, hotels, theatres and ski slopes, and temporary, because the return to the restrictions after 2 weeks is a real possibility. What this means is that the Polish economy is still struggling with a creeping lockdown. The Lockdown Loss Meter shows in real time the cumulative economic loss in terms of lost income since the first lockdown in the spring last year, as well as it informs in detail about the losses in four critical industries that either were or are ‘frozen’ (restaurants and related businesses, fitness, entertainment, hotels). The Meter is going to be updated depending on the current changes in the sanitary regime. Its creators, the Warsaw Enterprise Institute and the Union of Entrepreneurs and Employers, believe the losses incurred as a result of the lockdown were unnecessary The economy should function continuously provided a stricter sanitary regime is maintained.

The calculations by WEI and the Union indicate that the spring lockdown caused the greatest damage to the economy. At that time, Poland’s GDP decreased by 0.74%. The decrease was mainly induced by restrictions in retail trade and the related closure of shopping centres and agri-food markets. The drop in value added generated by the retail trade sector reached PLN 5.47 billion. Being an indirect effect, further drop values also occurred in sectors related to retail trade: wholesale trade – PLN 4.10 billion, industry – PLN 0.45 billion, energy – PLN 0.17 billion, and transport – PLN 0.21 billion. In the case of individual services, such as hairdressers and beauticians, losses resulting from the spring lockdown amounted to PLN 1.03 billion. Such sectors as entertainment and culture, tourism, sports and recreation, air transport and hotel industries also recorded steep declines.

According to preliminary estimates of the Central Statistical Office of Poland, the gross domestic product (GDP) in 2020 was lower in real terms by 2.8% compared to 2019. Of course, this decline is not only the result of economic restrictions, but also of a decline in foreign demand and consumer moods as well as increased sanitary precautions. However, the Meter – whose operations are based on the input-output model – sifts these phenomena away, focusing only on the losses caused by the lockdown. It takes into account not only the income lost in frozen industries, but also the indirect impact that freezing them had on other sectors.

The Meter is also available online: http://licznik.wei.org.pl/

It will be taken down when the last industry is ‘unfrozen’ and all lockdown policies finally abandoned.

 Warsaw, 5th February, 2021

 

Debrief: ‘Protectionism within the European Union and how to tackle it’

 

The single market is one of the greatest achievements of the European Union. Nevertheless, independent studies conducted by the European Commission and the Union of Entrepreneurs and Employers show that protectionism is a serious problem affecting the majority of entrepreneurs and hindering the development of the single market. Elimination of existing barriers could attract an additional €17 billion of investment per year and generate another 1.3 million jobs – keys to restoring the competitiveness of the European economy in the aftermath of the pandemic. Both studies show administrative practices (i.e. requirement to present additional certificates) rank as top protectionist measures. While most of them can be addressed through prohibitions established under the EU law, the current legal framework seems insufficient to cope with all the problems of the single market. During the webinar, distinguished panelists brainstormed solutions on improving the quality of the internal market.

The discussion which took place on 5 February 2021 via ZOOM, gathered Mr. Horst Heitz, the Chair of the Steering Committee of the SME Connect as well as 3 members of the European Economic and Social Committee – Ms. Jana Hartman Radová, the Head of Brussels Office of Confederation of Industry of the Czech Republic, Mr. Marcin Nowacki, the President of the European Enterprise Alliance and Mr. Tomasz Wróblewski, the President of the Warsaw Enterprise Institute.

Research conducted with the participation of over 1150 entrepreneurs from Poland, the Czech Republic and Slovakia has shown that almost 40% of the surveyed companies have experienced encountered protectionist measures within the European Union. Administrative burdens as well as the requirement to present additional documents (certificates, attestations etc.) are some of the most common practices encountered.

Most of these practices can be addressed through a wide range of restrictions contained in the European law as well as the rich jurisprudence of CJEU. However, the current legal framework does not seem to be sufficient to address all the problems of the common market for several reasons. For instance, the current regulations are insufficient to address the problem of greater meticulousness in enforcement of laws in case of foreign companies.

One of the Union of Entrepreneurs and Employers ideas for improvement of the quality of the internal market is the introduction of a horizontal direct effect on the free movement of goods. This will open the path for these provisions to be invoked in disputes between private persons before national courts, thus revolutionizing the functioning of the common market and enabling the restoration of competitiveness of the European economy.

 

Watch our webinar: “Protectionism within the European Union and how to tackle it”. 

 

fot. Giampaolo Squarcina / ma lic. Flickr.com

Warsaw, 20^th January 2021

 

Memorandum of the Union of Entrepreneurs and Employers on the impact of restrictions on coronavirus transmission: opening the economy is associated with a moderate risk of increase in the number of infections

 

Abstract

In this document, we summarise the results of two independent studies that look at the effectiveness of government restrictions on reducing coronavirus transmissions. These studies show that among the non-pharmaceutical interventions used, the ban on public gatherings of more than ten people and the closure of schools both have the greatest impact on reducing the number of cases. Meanwhile, the impact of restrictions on economic activity, such as food catering industry or services, is limited. Similarly, in terms of easing restrictions, a significant increase in the number of infections was recorded only in the case of reopening schools and allowing public gatherings. The results of the reserach discussed compel to question the validity of the order of easing the restrictions adopted by the government, within which it was decided to partially reopen school, while maintaining restrictions for business activity.

The first coronavirus case was diagnosed in December 2019. Thirteen months later, a total of nearly 100 million coronavirus cases have been reported and 2 million people have died of COVID-19.

To contain the spread of the new virus, governments around the world imposed a number of restrictions on economic and social activity. Restrictions, formally known as non-pharmaceutical interventions, unfortunately have severe consequences. In Q2 2020, which saw the majority of restrictions, the GDP of the European Union fell by 13.9% y-o-y, and unemployment increased by 2.7%. These were the sharpest recorded economic declines since measurements began in 1995.

The pandemic came as a shock to countries and economies around the world. However, data is collected over time that allow for the evaluation of the effectiveness of specific actions. Two independent studies can be cited as examples thereof. The first was conducted by a team of researchers led by Jan M. Brauner Ph.D. from the University of Oxford and published by the American Association for the Advancement of Science. It examines the effectiveness of restrictions introduced by the governments of 34 European and 7 non-European countries in the period from January to May 2020 [1].

The other study, conducted by a group of researchers appointed especially for the purposes of scientific evaluation of the evidence for the coronavirus pandemic from the Usher Network for Covid-19 Evidence Reviews at the University of Edinburgh, UNCOVER for short, examines the effectiveness of measures introduced between 1^st January and 1^st July 2020 in 131 countries. [2] Most importantly, scientists from the Usher Institute scrutinised not only the effectiveness of restrictions in reducing viral transmissions, but also the impact of easing restrictions on renewed outbreaks of the disease.

The most important conclusions by researchers led by Brauner are the following:

• the only measures with a significant impact on infection reduction (over 35%) are the closure of schools and colleges, and the restriction of gatherings to 10 people or less;
• the closure of businesses offering non-basic products and services had a moderate impact on reducing the number of infections (17.5-35%);
• stay-at-home orders proved to have little effect (less than 17.5%) in reducing the number of cases;
• the closure of bars, restaurants and nightclubs had little effect on virus transmission in 42% of cases and moderate in 58% of cases.

In terms of the effectiveness of stay-at-home orders, one should keep in mind that these measures were usually imposed last, following other restrictions. Brauner et al. took that into account and calculated that in the event of early school closures, a ban on mass events and the closure of some enterprises, the stay-at-home order had little effect on a further reduction of coronavirus transmissions.

Turning to the main conclusions of the team at the Usher Institute, the following points should be mentioned:

• the introduction of a ban on mass events is associated with the biggest drop in coronavirus transmissions;
• in terms of easing the restrictions, a significant upward trend in infections was recorded only after the relaxation of restrictions on school closings and the ban on public gatherings for more than 10 people;
• the reopening of schools is associated with the highest increase of cases diagnosed on the 7^th and 14^th day after restrictions were eased;
• the possibility of organising gatherings of more than ten people is associated with the largest increase on the 28^th day after the ban was relaxed.

The following three basic conclusions can be dound in both studies.

First of all, the most effective means of reducing viral transmission appears to be limiting public gatherings and the on-site activities of educational institutions.

Secondly, the closure of economic activities such as the food catering industry and services has only a limited (low to moderate) impact on the number of infections.

Third, the greatest increase in the number of cases is related to the easing of restrictions on public gatherings above 10 people and the reopening of schools.

The research results summarised above question the validity of the strategy chosen to fight the coronavirus. Maintaining restrictions on economic activity, which have at most a moderate impact on the increase in the number of infections, is associated with an enormous economic and social cost. In spite of the aforementioned conclusions, the plan to lift the restrictions, presented in November, was abandoned – the economic lockdown is still in force, and at the same time, it was decided to partially reopen schools, even though research indicates that it is associated with a significant risk of an increase in the number of infections.

Considering the data and research results presented above, we once again call for the opening of the economy and a revision of the strategy to combat the coronavirus. Restrictions on economic activity have at best a moderate effect on the number of infections. Meanwhile, the prolonged lockdown increases the risk of a massive wave of bankruptcies and layoffs, the negative economic and social costs of which are currently impossible to predict and estimate.

Bibliography:

You Li, Harry Campbell, Durga Kulkarni, Alice Harpur, Madhurima Nundy, Xin Wang, Harish Nair, for the Usher Network for COVID-19 Evidence Reviews (UNCOVER) group, The temporal association of introducing and lifting non-pharmaceutical interventions with the time-varying reproduction number (R) of SARS-CoV-2: a modelling study across 131 countries, in Lancet Infectious Diseases 2020, available online: https://www.thelancet.com/action/showPdf?pii=S1473-3099%2820%2930785-4

Jan M. Brauner, Sören Mindermann, Mrinank Sharma, David Johnston, John Salvatier, Tomáš Gavenčiak, Anna B. Stephenson, Gavin Leech, George Altman, Vladimir Mikulik, Alexander John Norman, Joshua Teperowski Monrad, Tamay Besiroglu, Hong Ge, Meghan A. Hartwick, Yee Whye Teh, Leonid Chindelevitch, Yarin Gal, Jan Kulveit, Inferring the effectiveness of government interventions against COVID-19, in Science Magazine 2020, available online: https://science.sciencemag.org/content/early/2020/12/15/science.abd9338

 

[1] https://science.sciencemag.org/content/early/2020/12/15/science.abd9338

[2] https://www.thelancet.com/journals/laninf/article/PIIS1473-3099(20)30785-4/fulltext#articleInformation

 

See: 20.01.2021 Memorandum of the Union of Entrepreneurs and Employers on the impact of restrictions on coronavirus transmission: opening the economy is associated with a moderate risk of increase in the number of infections

 

ProEXR File Description

Warsaw, 12^th January 2021

 

Trade tax was to level the playing field, but in the electronics/household appliances industry, only Polish companies will pay it

 

The trade tax had two goals: to level the playing field in terms of competition between smaller and larger companies, and to indirectly counteract the expansion of foreign retail chains in Poland. In practice, however, in the electronics and household appliances industry, only Polish companies will pay this tax. Their biggest competitor, the German corporation Media Markt, divided its stores into separate companies and will not pay a penny. This proves that the trade tax will not only fail to achieve the goals intended by the legislator, but will also be a burden to domestic enterprises, thus worsening their position on the market.

The Union of Entrepreneurs and Employers has repeatedly appealed to the government not to introduce any new taxes during the pandemic. We stick to our position and call for the collection of trade tax in 2021 to be stopped. Moreover, the Union has consistently opposed the introduction of sectoral taxes, as well as reminded that the long-term solution to the problems related to tax avoidance lies in a profound reform of the tax system and should consist in the elimination of the corporate income tax and replacing it with a revenue tax.

The effects of introducing such a trade tax are clearly evident on the example of the electronics, household appliances and IT industry. Its characteristic feature is the disproportion between suppliers (global concerns) and sellers (local enterprises). Profitability is in the range between 2 and 4%. The second trade tax rate in the amount of 1.4% will consume a significant part of the profit of household appliances sellers. This in turn will worsen the competitive equilibrium between Polish and foreign enterprises, especially since the latter group will not pay that tax at all.

Discussing the effects of the introduction of the trade tax from 1^st January 2021, it is impossible to ignore the economic consequences of the coronavirus pandemic. It is the position of the Union of Entrepreneurs and Employers that it is incomprehensible and unacceptable to add burdens on enterprises during such an unprecedented crisis. Furthermore, increasing the burdens will also lead to an economic slowdown that we cannot afford at the moment.

In the years 2021-2027, Poland will receive funds hitherto unseen. In the new budget perspective, Poland will receive EUR 160 billion from EU funds. EUR 57 billion will come from the Reconstruction Fund created to help member states face the challenges of the coronavirus pandemic. By comparison, over 16 years of EU membership, Poland received approx. EUR 181 billion. In the light of such enormous funds, it seems obvious that the budgetary pressure to introduce new taxes should be much lower, and the Polish government should not introduce new burdens on entrepreneurs struggling with the effects of a crisis.

 

See report for more: 12.01.2021 Report by the Union of Entrepreneurs and Employers: Effects of the introduction of the retail sales tax from 1^st January 2021

Warsaw, 23^rd December 2020

 

APPEAL OF THE UNION OF ENTREPRENEURS AND EMPLOYERS FOR A 12-MONTH-LONG MORATORIUM ON NEW BURDENS

 

• The year 2020 has been the most difficult period for Polish companies in many years. Within a few months there have been three giant blows to businesses: a tight lockdown in March-May, reduced demand in “social sectors” in June-August, finally a second wave of the epidemic that started in September, which resulted in the ongoing re-closure of a significant part of the economy.
  
  
• The ability to adapt to the new conditions and the liquidity aid provided by the government helped entrepreneurs survive the difficult period in the spring. Unfortunately, the following months seriously undermined the stability of some industries, and the second lockdown poses an enormous threat to all companies in Poland.
  
  
• Examples of other OECD member states, such as Australia, Sweden, the Czech Republic or Germany, show that in response to the crisis caused by the coronavirus pandemic, a significant part of governments have decided to cut taxes and reduce administrative burdens.
  
  
• The Australians are pursuing a consistent programme of tax cuts, the Swedes plan to lower PIT and social security premiums, while the Germans and the Czechs have decided to cut VAT. Similar trends (towards lowering burdens) are also visible in the policies of the United States.
  
  
• We regret to observe that Poland has not joined this trend. Instead of striving to reduce the burden and to deregulate, Poland has decided to introduce solutions unfavourable for business. These include, for example, the taxation of limited partnerships with CIT, the introduction of the sugar tax, the amendment to the “rain tax” or the restrictive implementation of the audio-visual directive.
  
  
• Studies show that the willingness of Polish companies to invest has been the lowest in years. According to the “Busometr” survey by the Union of Entrepreneurs and Employers, only 32% of entrepreneurs plan to make any investments in the coming months. On the one hand, this is a result of the uncertainty related to the spread of the epidemic, and on the other – a consequence of the lack of regulatory stability and the introduction of new, unfavourable regulations, mentioned above.
  
  
• Public opinion surveys show that the majority of entrepreneurs (68% according to Kantar Global Business Compass) believe that the effects of the pandemic are severe for enterprises. According to a poll carried out by CBOS at the turn of May and June, every tenth respondent had to limit operations and reduce employment in the company.
  
  
• The impact of the epidemic is also visible in objective economic data – Poland’s seasonally adjusted GDP shrank by 7.9% year-on-year in the 2^nd quarter of 2020. Further reductions in economic activity in the fall and winter will worsen the results for the whole year.
  
  
• We would like to make it clear that the next twelve months constitute the worst possible period to introduce new burdens. Companies are facing the consequences of the epidemic, lowered demand, and the effects of a lockdown – additional taxes, increased levies or the introduction of new administrative obligations can be a fatal blow to many companies.
  
  
• The consequences of introducing additional burdens in such a difficult economic time may be far-reaching and severe. They may concern both the labour market and the investment rate, economic activity, and ultimately – the affluence of the Polish nation. One should remember that bankruptcies of companies or significant drops in their revenues translate into a reduction in employment or a decrease in wages. This, in turn, translates directly into the deterioration of the situation of employees and their families. The lack of new burdens in the difficult time of the epidemic is therefore a postulate not only pro-business, but also pro-employee and pro-social.
  
  
• Bearing in mind all of the above, we urge the government to adopt a 12-month-long moratorium on all new burdens, including, in particular, those of a tax and para-tax nature, such as the sugar tax or the retail sales tax. Polish businesses must have a chance to survive and recover after the crisis caused by the epidemic. Should the new burdens make it impossible, the scale of the negative impact on the economy may be difficult to predict, and the cost of these burdens will certainly be higher than that caused by the postponement of new levies.

 

See: 23.12.2020 Appel of the Union of Entrepreneurs and Employers for a 12-month-long moratorium on new burdens

 

Fot. Proxima Studio / Adobe Stock

Warsaw, 23^rd December2020

 

The Union of Entrepreneurs and Employers demands the economy to be unlocked

 

The Union of Entrepreneurs and Employers is critical of the introduction of the next stage of shutting down the economy. The Union calls for actions aimed at the unlocking of all closed sectors, the implementation of educational activities aimed at citizens and entrepreneurs, as well as the enforcement of the sanitary regime in the DDM standard and epidemic guidelines for all industries.

We have observed that the solutions to be introduced [by means of the Regulation of the Council of Ministers on the establishment of certain restrictions, orders and bans in connection with the epidemic, draft act of 21^st December 2020 (RD275)] constitute the next stage of a creeping lockdown of the economy.

The fourth quarter of the epidemic has begun. There is no indication that the number of new cases as well as the burden on the healthcare system will be reduced on a weekly basis as a result of vaccination. We must adapt our actions to the situation in which the coronavirus will be a significant phenomenon from the point of view of state management in the months to come. Unfortunately, the answer to this problem must not be to close subsequent sectors of the economy with relative passivity in the remaining scope. The lockdown of the economy must not be the main instrument in the fight against the coronavirus. We must not at this point refer to the practices of the so-called West, where the capital generated over the past decades is and will be the “safety cushion” for developed economies. We must have the courage to face the facts. After a year of empirical experience on a global scale, there is no clear evidence that lockdowns are an effective instrument to fight the epidemic. They usually impact the state of affairs, but that impact is not a decisive factor. Essential in this case are the following: models of social interaction and behaviour, compliance with sanitary standards (distance, disinfection, mask), a society’s demographic structure, and cohesive communication from those responsible for crisis management.

The Union of Entrepreneurs and Employers draws attention to the inconsistency of government actions in the field of communication, transparency, and predictability of decisions. While we have full understanding of the dynamically changing epidemic situation and preventive actions, we are extremely critical of the inconsistency of the decisions made with planned decisions presented earlier. The government announced on 4^th November 2020 that when the average of seven days of illness exceeded 27,000 new cases on a national scale, a national quarantine would be implemented, including restrictions on movement. There is also a graphic showing clearly the thresholds of the safety regulations. We assessed positively the presented “road map”, recognising that it generated the basic predictability of decisions to be taken. However, a few weeks later, the so-called national quarantine was in fact introduced, while the level of cases over that last 7 days prior to the announcement suggested rather lifting the restrictions in line with the previously communicated strategy. We are concerned that the inconsistency between decisions taken and those communicated may diminish the government’s credibility in terms of anti-epidemic activities. This is particularly important in the period when one of the key short-term policy goals should be, amongst other, to persuade as many people as possible to get vaccinated.

Regardless of the above, we negatively evaluate the introduction of lockdowns in subsequent industries. The closure of shopping malls, swimming pools, aquaparks, gyms, clubs and fitness centres, entertainment and recreational activities or ski slopes will have a measurable impact on the economic and social situation of thousands of Poles, and consequently the economic recession in the coming quarters. Furthermore, the total lockdown of hotels will not only affect this industry itself, but also hamper operations of all industries that require business travel – the production sector in particular. While we understand the concerns related to a possible third wave of the epidemic, as well as those regarding the reports of new mutations of the virus, we consistently point to the lack of proper, evidence-based justifications for introducing restrictions in other industries. Therefore, it is difficult to understand both the sectoral scope of the proposed restrictions and their details (for example, the key to selecting the types of shops that can be open in shopping centres remains a mystery; or the shutdown of “retail islands” in shopping centres located in open spaces such as passageways). The procedure for announcing the latest regulation also deserves criticism – although it appeared in advance, it was not decided to subject its content to consultation with representative organisations.

We would like to draw your attention once again to the critical situation in the food catering industry, which was significantly affected by the lockdown in the spring. Currently, it has been closed for months, with no prospects of a change in their situation. The government also has not presented any future aid plan not only for this industry, but also for other closed ones after the lifting of the restrictions. We consistently call for the introduction of a uniform VAT rate of 5% for the entire food catering industry and for the introduction of similar discounts for other sectors whose operations are now limited. Such solutions would be a real help at the stage of unlocking the economy and would constitute a beneficial solution that the government could introduce for businesses after the epidemic.

At the same time, the Union of Entrepreneurs and Employers once again calls for the introduction of solutions in the field of e-commerce to compensate for the lack or limitation of sales in traditional channels. This would enable consumers to purchase certain products without having to physically go to stores, which is of considerable importance taking into account the epidemic. In this context, it would be reasonable, for example, to allow remote sales of those categories of goods which at the moment cannot legally be sold this way. In particular, it concerns low-percentage alcohol (wine, beer, ciders), prescription drugs or tobacco products, as well as novelty and electronic cigarettes. These solutions seem to be justified in the context of the introduced restrictions in movement, as well as the goal of limiting the mobility of citizens, assumed by the government. So far, however, only restrictive solutions have been set to achieve this goal.

To sum up, in our appeals to date, the Union of Entrepreneurs and Employers has emphasised the lack of predictability in the actions undertaken by the legislators and regulatory uncertainty. They are particularly pronounced during the ongoing crisis, and the actions announced in recent days are a clear example of this. This will result in limiting the risk of making business decisions (including investments). A 12-month-long moratorium on any new burdens for workers and entrepreneurs is necessary. We also call for a direction to be determined in terms of comprehensive law simplification and deregulation. These and other necessary actions were presented by the Union of Entrepreneurs and Employers in the Union’s postulate as part of the planned social pact on 17^th November 2020.

The introduction of further restrictions will be less and less effective. The law must not be on a collision course with economic practices, reality, and society’s expectations. Such a strategy of fighting the epidemic already causes growing resistance amongst citizens and entrepreneurs. Presently, Poles are learning anew, just like under the socialist regime, how to circumvent laws that are too rigorous and do not correspond to reality.

 

See: 23.12.2020 The Union of Entrepreneurs and Employers demands the economy to be unlocked

 

Fot. Corona Borealis / Adobe Stock

Warsaw, 8^th January 2020

 

Commentary by the Union of Entrepreneurs and Employers:
Either we re-open the economy after 17^th January, or the crisis spreads to all sectors

 

The prolonged lockdown and further restrictions may lead to a real economic collapse. On the macro scale, Poland copes relatively well with the economic effects of the epidemic, but a number of industries – those currently subject to special rigors or a complete ban on operations – are in an extremely difficult situation. Maintaining the currently enforced restrictions after 17^th January 2021 is associated with the risk of a wave of bankruptcies in the sectors covered by those restrictions and the spread of the crisis also to related sectors. Entrepreneurs will not be able any longer to bear the costs of the unpreparedness of the healthcare system for the epidemic – in the second half of January, we should re-open all industries, while maintaining the DDM rigor.

On 4^th March 2020, the first case of the novel coronavirus was diagnosed in Poland. It is, therefore, the eleventh month as companies operate under restrictions, orders and bans, the scope of which is amended every few weeks. We can say with full responsibility that entrepreneurs passed this difficult exam with flying colours: they immediately introduced increased sanitary standards, reorganised their operations, successfully implemented – where possible – remote work, even in the absence of adequate regulations in this area. Some of them are also financially involved in the fight against the virus.

The world of business demanded a quick opening of the economy and the narrowest possible scope of restrictions, but generally followed the standards introduced by subsequent regulations. Thanks to entrepreneurs’ responsible attitude, the government had the necessary comfort to make decisions aimed at enforcing social distancing and isolation.

After almost a year of fighting the pandemic, the situation is quite different. Restrictions and bans that lasted for months have led many entrepreneurs to the limits of financial strength. There is no longer any trace of spring discipline – an increasing number of companies are trying to circumvent, often in highly creative ways, the regulations introduced in connection with the epidemic. No matter how much we advocate abiding by the letter of the law, it is difficult to expressly criticise entrepreneurs trying to survive at any cost. The more so because – unlike last spring – many of them have not received any financial aid yet, despite the fact that they were made subject to new restrictions in October.

Another negative phenomenon is the evident crisis of confidence in the government. The dominant belief is that restrictions are introduced almost at random. No specific argumentation is presented to justify a more restrictive approach to a given sector that they cover. Chaos rules the information policy and the decision-making process – for weeks, new restrictions were announced at the last minute, shy of their introduction. When in November it was decided to somehow structure the strategy to combat the epidemic and present a roadmap for reducing restrictions, the document immediately became obsolete.

At the moment, each day brings reports of a critical situation in new industries. The food catering industry has not been operating normally for almost a year. The fitness industry, although it has learnt to operate under increased sanitary standards, remains completely closed. Regulations regarding stores in shopping centres change every few weeks – immediately after Christmas, many of them were again shut down.

Therefore, it must clearly be said: we have come to a point where it becomes economically too costly to maintain the limits on the economy It would be an oversimplification to say that “Poland is doing just what the rest of Europe is”. Most of the countries that maintain or extend the restrictions are either much wealthier than Poland (e.g. the United Kingdom, Ireland, Germany or France), or are in a much worse epidemic situation (e.g. the Czech Republic). Meanwhile, despite the impressive economic progress, (compared to other Europe countries) we are still relatively poor and, only thanks to social discipline, we managed to stop the uncontrolled increase in the number of infections. Continuing the policy of opening and closing industries on the basis of factors that are difficult to determine may result in us squandering a large part of the achievements from the last three decades.

Considering all the above, the Union of Entrepreneurs and Employers appeals to the Prime Minister and the Minister of Health as well as the team supporting them to unlock all industries after 17^th January 2021. Maintaining restrictions will be associated with the risk of a real crisis and a wave of bankruptcies covering almost all sectors of the economy. We must return to our normal lives. A manifestation of this necessity is the announcement of primary school children in grades 1-3 going back to school. Since we are discussing the transition of some pupils to classroom teaching, we should also make bold decisions in terms of opening subsequent industries.

 

See: 08.01.2020 Commentary by the Union of Entrepreneurs and Employers: Either we re-open the economy after 17th January, or the crisis spreads to all sectors

 

Fot. denisismagilov / Adobe Stock

Warsaw, 16^th December 2020

 

Pursuit of technology sovereignty or new protectionism? Discussion on the new direction of European policy-making with particular emphasis on the Digital Services Act

 

On Tuesday, 15^th December 2020, the European Commission’s legislative proposal on the Digital Services Act (hereinafter referred to as “DSA”) was published. Public consultations conducted by the European Commission concerning the shape of future regulations, in which the Union of Entrepreneurs and Employers took part, ended on 9^th September. Moreover, the European Enterprise Alliance and SME Connect also presented their opinions in this respect.

The event devoted to discussing the technological sovereignty of Europe and DSA was attended by Marianna Sidoroff, Deputy Director of the Digital Economy Department at the Ministry of Development, Labour and Technology, who delivered a keynote speech, and Fredrik Erixon, Director of the European Centre for International Political Economy, who presented the report entitled “Europe’s Quest for Technology Sovereignty”. Furthermore, the panel discussion was attended by Horst Heitz, Chair of the Steering Committee at SME Connect, Tomasz Snażyk, President of the Startup Poland Foundation, and Michał Kanownik, President of the Management Board of the Association of Importers and Producers of Electrical and Electronic Equipment – ZIPSEE “Digital Poland”.

The Digital Services Act aims to regulate the provision of digital services and to create a level playing field for EU companies. Nonetheless, the new EU regulation also has specific consequences for SMEs, especially those in Central and Eastern Europe.

“In our contribution to the consultations, we called for respect for the fundamental principles of the digital single market, such as the home state regulation, known as the country of origin principle. Entrepreneurs need a clear and concise regulatory framework that will not undermine technological development. This applies in particular to companies from the SME sector, whose development is supported by digital platforms,” says Marcin Nowacki, Vice President of the Union of Entrepreneurs and Employers.

It is essential to respect the country of origin principle. In line with its ideals, companies may provide digital services in other member states under the laws of their home country, that is, their country of origin. This rule is especially important for enterprises from the SME sector and from the Central and Eastern European region, as it mitigates the fear of applying foreign law in the event of litigation.

“The COVID-19 pandemic has accelerated the digital transformation of our society at an unprecedented pace. The digital infrastructure has turned out to be fundamental for our society,” says Marianna Sidoroff, Deputy Director of the Electronic Economy Department at the Ministry of Development, Labour and Technology, and adds: “The concept of technology sovereignty combines economic strategy with values. We strive to protect the fundamental values of the European Union, while allowing the development of companies in the single market.”

Recently, we have witnessed legislative progress in the field of online content supervision in several member states. Unfortunately, this has also led to discrepancies between national and sometimes even regional and local regulations. Such legal fragmentation hinders the free movement of services and, as a result, the functioning of the single market. Effective regulation in this regard should minimise fragmentation at the national level as well as take into account existing legislation when identifying needs in the context of a sectoral or horizontal approach.

Moreover, the introduction of the ex ante regulation seems very problematic. Internet platforms play a particularly important role in the development of companies from the SME sector. Thanks to them, small and medium-sized companies gained the opportunity to enter the market, expand and develop their operations beyond domestic markets, which had previously been impossible. These facts show that the introduction of a demanding ex ante regulation may have a negative impact on companies from the SME sector, and as a result, might reduce the assortment and offer available to consumers. Therefore, the Union of Entrepreneurs and Employers believes that the proposed regulations should be based on the currently enforced and legally binding regulations, such as the P2B Regulation.

 

Fot. François Genon / Unspalsh.com

Warsaw, 30^th November 2020

 

Commentary of the Union of Entrepreneurs and Employers:
Adoption of double taxation on limited partnerships is a breach of the solidarity pact with business and is unfair to entrepreneurs

 

From the beginning of the legislative process, the Union of Entrepreneurs and Employers emphasised there were no rational arguments for the need to cover limited partnerships with CIT. The theses contained in the explanatory memorandum to the draft act turned out, one after another, to be false. Neither limited partnerships are used for purposes of tax optimisation (we stress once again that the Ministry of Finance itself admitted that the tax scheme using limited partnerships was only challenged six times basing on the anti-tax avoidance clause), nor has there been an unreasonable or detached from economic reality increase in recent years in their number. Furthermore, it is a generally accepted European practice not to cover these entities with CIT.

Nevertheless, the Ministry of Finance did not give up on this idea. As a result, the Sejm passed the double taxation of limited partnerships last Saturday, and the president signed the act that very same day, at night.

This is yet another levy that entrepreneurs (and at the end of the day – households and consumers) will have to pay from next year on. Recently, the sugar tax was adopted, and beginning on 1^st January 2021, the collection of the trade tax will be resumed. The design of the latter is, incidentally, so flawed that within the electronics and household appliances industry, there will only be one significant Polish taxpayer.

We fail to comprehend the stubbornness with which the government has consistently been introducing new burdens during a crisis, the worst one in decades. The assumed revenues from them constitute a drop in the ocean to save the economy, and even in “normal” times, they would not be a factor determining the budget balance. All the more so, the potential fiscal result of these burdens today cannot be assessed otherwise than as insignificant.

Many entrepreneurs, contrary to economic calculation during a crisis, keep the jobs they created in the name of social solidarity. The imposition of new taxes on them at this time is generally perceived as unjust and unfair.

We see what is happening in Europe. The analysis we conducted a few weeks ago shows that a significant number of OECD countries had decided decides to reduce their tax burdens in the face of the crisis. Germany lowered VAT. The Swedes proposed a comprehensive reform package to stimulate the economic growth, including a reduction in PIT or a decrease in social security premiums. The Czechs lowered VAT for selected services some time ago, and decided recently to lower the PIT rate.

At the same time when an increasing number of European countries decided to reduce burdens and cut taxes, the Polish government not only was unconvinced of the – seemingly obvious – VAT reduction on food services, allowing this industry to survive this difficult period, but on the contrary, it was more concerned with designing new burdens. Moreover, the Minister of Finance has already announced (despite earlier declarations) that further burdens may be imposed next year.

We believe that the introduction of new taxes during the COVID-19 crisis will thwart economic recovery and slow down the return of growth. For some time, it seemed to be an argument understood by certain decisionmakers. The general consensus around this issue made it possible to hope that the issue of abstaining from new burdens would be one of the key axes of agreement between businesses, the labour market, and the government. Considering recent decisions and the incomprehensible determination to introduce new burdens, maintaining this unity in the face of the pandemic seems doubtful.

 

See: 30.11.2020 Commentary of the Union of Entrepreneurs and Employers: Adoption of double taxation on limited partnerships is a breach of the solidarity pact with business and is unfair to entrepreneurs

 

Fot. stevepb / pixabay.com