Warsaw, 25^th November 2019

 

Union of Entrepreneurs and Employers publishes a report on
environmental protection

 

On 25^th November 2019, the Union of Entrepreneurs and Employers published a report on issues related to environmental protection. The material was created as part of the Union’s Energy and Environment Forum inaugurated last week.

In the publication, experts of the Union of Entrepreneurs and Employers presented diagnoses and recommendations regarding four basic categories of issues related to environmental protection: climate and air, waste management, permits and environmental fees, and water.

“We do not operate in a vacuum. Environmental issues are being given an increasingly higher priority at both the European and national levels, so they naturally also become the subject of our closer interest,” says Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers. “The report on environmental protection is the first document that was created within the Energy and Environment Forum and presents horizontally our key recommendations in this area.”

In the part dedicated to climate and air quality, a division was made into three areas: industrial and energy, domestic and municipal, as well as transport. A separate set of recommendations was assigned to each area. The Union’s experts pointed to the necessity of, among others, use of available financial instruments that can support the transformation of the Polish energy sector, increase the effectiveness of the “Clean Air” program, while expanding its scope and implementing sound transport regulations, aimed more at supporting the development of low-emission vehicles available to the widest consumer groups or sharing economy than at implementing further restrictions for entrepreneurs and citizens.

“The general idea behind most of the recommendations the report contains is the broadest possible use by the legislator of the “carrot” instead of the “stick” in the broadly understood environmental policy,” emphasises Marcin Nowacki, Vice-President of the Union. “An increasing care and concern for the environment are already a civilisational process, but we must not forget about the economy and the people’s standard of living. Environmental regulations should not impact these areas negatively.”

Waste management is another important subject area covered in the report. This is an important issue since the deadline for transposing the waste directive package will expire soon and, only a year later, Poland will have to implement the directive’s provisions on limiting the impact of certain plastics on the environment.

“Enforcing these provisions is a big challenge for Poland,” claims Jakub Bińkowski, the Union’s director of the Law and Legislation Department. “We must remember that they contain not only hard goals, e.g. in the scope of materials’ recovery, which we need to achieve, but also indicate actions that we should undertake to achieve those goals. Therefore, even the implementation of an appropriate mechanism of extended producer responsibility will be crucial for the effective functioning of the entire system.”

In terms of environmental permits and fees, the Union’s experts primarily highlight the need to simplify and standardise the system, while in the part on water management they stress the need to invest in retention reservoirs and to pursue an active policy making the public and entrepreneurs aware of the principles of reasonable water management.

“We do not want environmental issues to be debated only by representatives of two extremes,” summarises Cezary Kaźmierczak. “We hope to be a balanced voice backed by common sense, attracting attention to areas where some state activity is necessary, and at the same time emphasising that all types of activities should take into account the possibilities and potential of entrepreneurs, as well as the impact of the proposed regulations on the daily lives of the Polish people.”

Download the report: 25.11.2019 Report by the Union of Entrepreneurs and Employers: Environmental protection

 

Fot. photoshopper24 / pixabay.com

Warsaw, 7^th November 2019

 

WEI and Americans for Tax Reform discuss the digital tax at a round table in the ‘Freedom Lounge’

 

On 6^th November 2019, a round table dedicated to the subject of the digital tax and the possible consequences of this concept entering into force in Poland took place in the ‘Freedom Lounge’. The event was organised by Warsaw Enterprise Institute, a think tank of the Union of Entrepreneurs and Employers, and Americans for Tax Reform, a Washington-based organisation fighting for taxpayers’ rights for over 30 years.

The event began with a presentation by Andreas Hellmann who at ATR deals with international tax law, including tax on digital services. After introducing the organisation he represents in a nutshell, he briefly described the history of the digital tax idea.

“By means of proposals to introduce a digital tax, France, the Czech Republic and Poland are trying to bypass international rules of tax jurisdiction,” he said. “Every politician’s dream is to tax people who have no influence on him being elected.”

The ATR representative then presented the current situation regarding the popularity of the idea of digital tax and negatively assessed the concept itself, indicating that this tribute ultimately burdens consumers.

“This tribute would impose an enormous financial burden for companies providing digital services (a large part of them American), which would in turn lead to higher prices for consumers in European countries,” he emphasised. “The digital tax is a huge threat to competition and innovation as well as American and European economic growth.”

After Andreas Hellmann’s speech, Jakub Bińkowski, director of the Department of Law and Legislation of the Union of Entrepreneurs and Employers, took the floor and presented the latest document by the Union: the Business Paper under the title “Digital tax and the threats resulting from its introduction”. He stressed the fact that the development of digital tools should not lead to attempts to create sectoral tax solutions.

“If international corporations are taxed inefficiently, it is necessary to consider systemic changes instead of drafting regulations only for selected industries,” he stated. “Especially since according to available studies, representatives of ‘traditional’ business often pay relatively lower income taxes than entities from the digital industry. So why should the latter be charged with any additional tribute?”

Both presentations highlighted the fact that international organisations such as the European Union and OECD have worked or are working on developing solutions for taxing the digital economy. Independent initiatives of individual countries in this scope do not serve solving the problem on a global scale, and are troublesome from the point of view of companies due to the chaos they generate.

Tomasz Wróblewski, Warsaw Enterprise Institute President, spoke after the presentations and opened the round table expert discussion. He said that at the moment it was difficult to isolate a digital economy, because digital tools and the Internet were becoming more and more commonplace tools used to run a business.

“Designing solutions exclusively for the ‘digital economy’ is a step in the wrong direction, as it is difficult to define this industry and the OECD admits it. There can no doubt that the digital tax is simply another idea aimed at obtaining even more money from citizens in the form of taxes,” he noted. “The French example perfectly shows that the group most burdened by this tribute after its introduction are the consumers, and indirectly its costs are also borne by smaller companies using digital solutions.”

Experts invited to participate in the round table, representatives of business and ministries, then discussed the concept of a digital tax, international experiences and the potential effects of introducing this tribute in Poland.

 

Download the report: 07.11.2019 Report by the Union of Entrepreneurs and Employers: Digital tax and the threats resulting from its introduction

 

 

Fot. geralt/pixabay.com

Warsaw, 19^th November 2019

 

Union of Entrepreneurs and Employers inaugurates the activities of the Energy and Environment Forum

 

On 19^th November 2019, during a dedicated press conference, the Union of Entrepreneurs and Employers inaugurated the Energy and Environment Forum. The Forum is intended to serve as a platform for business representatives, experts and other stakeholders to work on developing and implementing solutions for the broadly understood energy and environmental policies of the state.

“It goes without saying that issues related to energy and the environment will be some of the most important priorities of the new European Commission,” stated Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers. “Also after the formation of the new Polish government, one can realise that these subject will be quite high on the agenda. Therefore, we have come to the conclusion that representatives of business should participate actively in the process of developing solutions both at the strategic level, in relation to Poland’s energy transformation, as well as at the level of implementation of individual solutions adopted by the European Union institutions.”

The Union of Entrepreneurs and Employers has been keeping a very close eye on environmental issues for many years. In 2016, the Circular Economy Forum began operations, a special platform that managed to develop initial assumptions for the implementation model regarding the principles of extended producer responsibility as part of transposing the waste directive package.

“Many economic entities are not aware of the large changes ahead of them resulting from the introduction into the Polish legal order of solutions provided for in the ‘waste package’ or the directive on limiting the impact of certain plastic products on the environment,” highlighted Marcin Nowacki, the Union’s VP. “And this is why we want the new Forum’s role to encompass both conducting substantive work on the implementation of regulations as well as increasing awareness of business circles regarding the challenges that await us.”

The Forum’s work is to be divided into several sections, covering climate, air, waste and the circular economy as well as water. These sections correspond with the objectives of the Forum, which include participation in the development of the Polish energy transformation plan, participation in consultations on the implementation of the waste directive package, or development of recommendations in the field of state policies to improve air quality.

“A considerable amount of work within the Forum will certainly be devoted to issues of legislative nature, because all strategic projects are ultimately implemented by means of the adoption of legal acts,” said Jakub Bińkowski, director of the Union’s Department of Law and Legislation. “However, we aspire to be active also at earlier stages, among others, during conceptual work.”

After the presentation of the general objectives of the Forum by the representatives of the Union, the invited experts: Krzysztof Bolesta, Paweł Waligórski and Karol Wójcik, took the floor. Each of them presented key problems and priorities in their area of expertise: air quality policies, medical waste and waste management issues, respectively.

 

More information about the Energy and Environment Forum.

Warsaw, 18^th November 2019

 

Tender for a documentary series about the beginnings of Polish capitalism

 

The documentary series will consist of six episodes telling the story of a whole decade of Polish entrepreneurship after the fall of communism.

By portraying individual profiles of the participants of those events, we want to show the Polish people’s path to prosperity. We are creating these series with young and foreign viewers in mind who only know the history of the beginnings of Polish capitalism from family stories or media coverage.

The documentary’s purpose is to present the realities in which the pioneers of Polish business began their careers. How Polish capitalism developed and gained experience, shaped mostly by young people who created 6 million jobs without offices or computers, with no telephones or cars, without a banking system or infrastructure to back them up. Immersed in legal chaos, with rampant corruption, unchecked inflation and lack of professional support from lawyers, financial advisors, marketing experts, not to mention the inexistence of a developed loans and credits system.

In particular, we want to introduce to larger audiences the people who started from scratch, without any experience, initial wealth, post-regime affinities or support from the remnants of the communist secret services. How family businesses rose to power in times of chaos. We plan to dedicate one episode, or alternatively several mentions, to the so-called ‘postkomuna’ (post-communist elites) in order to showcase their advantages, the importance of systems, alliances and access to money. How years later they look against the background of the entire market.

It is our ambition to distribute the film abroad in the future, therefore the idea for a narrative itself will be essential. It must not be a boring story about a dozen people – just people talking. We want each episode to have its own emotional narrative that will allow the viewers to feel the tension and risk that former bazaar vendors, traders, smugglers, first publishers of press, books, builders, transport companies, shopkeepers etc. had to face.

Furthermore, the series ought to make use of archival footage.

We ask all interested parties to submit their ideas for the docuseries script until 6^th January 2020 to the following e-mail address: k.niemyjska@zpp.net.pl.

***
The series treatment description must not exceed one A4 page (2000 thousand characters). The budget for the entire project amounts to PLN 750 thousand. The process of selection of the winning project will take place in two stages: the being the selection of submitted proposals, the latter – interview.

The final selection of the script and winning authors of the documentary series will be carries out by Board members of ZPP and WEI – the Union of Entrepreneurs and Employers and Warsaw Enterprise Institute, respectively.

 

Fot. stokpic / pixabay.com

Warsaw, 25^th September 2019

 

POSITION OF THE UNION OF ENTREPRENEURS AND EMPLOYERS ON THE
DRAFT STATE BUDGET FOR 2020

 

The draft budget act for the year 2020 is definitely a historical project. For the first time after 1989, the government proposed a balanced budget, i.e. one in which the sum of revenues is equal to the sum of expenses. The lack of a planned budget deficit is an unprecedented phenomenon that should be assessed definitely positively. Thus far, a deficit amounting to tens of billions of zlotys was an almost certain element of every subsequent state budget. It is admirable, therefore, that with such extensive social policy, the government managed to balance revenues and expenses. This is also important because in the last few years, which were a period of excellent economic situation, subsequent budgets were characterised by relatively small, albeit still deficits.

At the same time, other European countries, such as Germany, were generating budget surpluses. We clearly assess the break up with this kind of “tradition” of having a budget deficit positively, and consider it a great step in the right direction in the general discussion on national financial management. By respecting the rule of expenditure and preparing a budget without a deficit, the government sent a clear signal, also crucial from the point of view of subsequent teams in power, that we should spend as much as we “earn” from taxes and other sources, or at least minimise the deficit. At the same time, at least a few sources of budget revenues that have helped formulate a balanced budget remain dubious. Some aspects of it may be of concern to entrepreneurs.

The planned abolishment of the so-called 30-fold limit has to be assessed negatively. Until now, an employee who generated an income higher than 30 times the forecasted national average remuneration over the course of a year, after reaching this ‘ceiling’, stopped paying social security contributions. This construction has two reasons. First of all, we can assume that people who earn relatively well will be more likely to save their own funds for retirement on their very own. Among other things, the 3^rd retirement pillar in the form of Individual Retirement Accounts or Individual Retirement Security Accounts serves as a tool to realise this potential. The current 30-fold limit allows one to generate a certain amount of funds that can be allocated to private retirement savings. Secondly, this limit is a security measure for the Social Insurance Fund, and indirectly also for the state budget. Under the system which is currently in force, the amount of pension depends on the amount of contributions paid over the years of professional activity to the system and the life expectancy forecasted by the Central Statistical Office. Thus, theoretically, the more someone has paid into the system, the higher their pension should be.

In the case of people earning relatively high sums, such a system, without the 30-fold limit, would be burdened with the risk of having to pay very high pensions in the future. This would be dangerous not only due to the financial condition of the Social Insurance Fund (especially taking into account the current financial forecasts of the Fund), but also the state budget, because in the case in which the funds accumulated in the Social Insurance Fund are not sufficient for the current payment of pensions, the Fund is ‘fed’ by the state budget. Therefore, despite the fact that it is a separate organisational unit, its financial condition has a direct impact on the state of the state itself. Therefore, we assess the abolishment of the 30-fold limit, as we have done it many times in the past, definitely negatively. Potential revenues from the abolition of the limit are estimated at approximately PLN 5 billion. It seems that entrepreneurs would gladly accept a correction of the announcement of a budget without a deficit considering the withdrawal from this idea which is clearly harmful to Poland.

The accumulation of social programs also seems to be dangerous. While the 500+ program significantly reduced the problem of extreme poverty among families with children in Poland, at the moment we are dealing with a multitude of different types of benefits, some of which were included in the draft budget (extension of 500+ to every first child, the “Good start” program which is a sort of a package for school children and adolescents, medication program 75+), some were adopted this year (13^th retirement), and others have just been announced (13^th and 14^th retirement as annual benefits for pensioners). In the current, still good economic situation, the successful implementation of these announcements is not endangered. The danger, however, exists that when the national economy stops growing at an expected pace, the state will be willing to reach deeper into the pockets of taxpayers, counting on primarily entrepreneurs and middle class representatives to finance their proposals. One of these manifestations may be the abolition of the 30-fold limit, which had already been discussed, however, in the context of the proposals contained in the Long-Term Financial Plan, it also seems dangerous to extend the obligation to pay social security contributions for other purposes. Such an increase in labour costs, combined with an increasingly intense wage pressure (especially in the context of an abrupt announcement of a minimum wage increase), must translate into an increase in the prices of products and services, and, consequently, lower competitiveness of Polish companies.

It is not at all possible not to notice that the budget includes a significant reduction in the tax wedge consisting of several elements, i.e. exemptions from PIT for employees up to 26 years of age, a reduction in the basic PIT rate to 17%, as well as an increase in tax deductible costs. This is obviously the desired direction. The Union of Entrepreneurs and Employers has consistently supported every initiative aimed at reducing all taxes and levies resulting in a payroll burden.

It is difficult to predict how realistic the macroeconomic assumptions used by project’s authors to develop a budget remain. The almost 10% revenue increase from VAT, stable revenues from income taxes and excise duties – there is no doubt that these issues were estimated assuming that the Polish economy will not be affected by a significant slowdown. It is impossible to say now whether such optimism was justified. One must, however, take into account the fact that so far the deteriorating sentiment in the German economy has not had a greater impact on the dynamics of Polish growth.

There is no doubt that the first balanced budget after 1989 is a very good piece of information. It is difficult to accept this success be depreciated by emphasising e.g. the one-off nature of some of the funds. Of course – some of them, such as the transformation fee from Open Pension Funds or proceeds from the sale of CO₂ emission permits do not take place on a regular basis. However, we are dealing with such cases very often, from various titles, and so far this has not resulted in creating a budget in which the sum of expenses would be balanced by the sum of revenues. At the same time, criticism should be taken into account, as it would be reasonable to develop a long-term strategy for balancing state finances, taking into consideration many risks – both of temporary and strategic nature – and finding ways to neutralise them. A budget without a deficit (or with a minimal deficit) should not be an exception in the long, multiannual history of state debt, but should become a new target, a kind of a standard that any government should strive for every year.

 

Download the position: Position of the Union of Entrepreneurs and Employers on the draft state budget for 2020

Warsaw, 22^nd October 2019

 

The Union of Entrepreneurs and Employers warns: abolishing the 30-fold limit is a terrible solution, there are other ways to find budget revenues

 

During today’s press conference, the Union of Entrepreneurs and Employers assessed the idea of abolishing the 30-fold limit on Social Insurance Institution contributions unequivocally negatively. The Union’s experts also gave examples of alternative actions ensuring the fulfilment of the assumption of finding an additional PLN 5 billion in budget revenues.

In the National Long-Term Financial Plan, the intention to abolish the 30-fold limit on Social Insurance Institution contributions is explicitly stated. According to current regulations, no social security contributions need to be deducted from income earned during the course of a year that exceeds 30 times the average remuneration. An attempt to adopt draft amendments in this regard took place in 2017, however, it was challenged by the Constitutional Tribunal for procedural reasons.

The current limit makes sense in a very obvious way. The point is that the state will not have to pay enormous pensions in the future. The legislator assumes that if someone earns relatively well, they are able to set aside funds for retirement on their own. Lack of such a limit would translate into an enormous burden on the Social Insurance Fund in the future, and one should also remember about the difficult demographic situation in Poland.

In accordance with the assumptions presented in the Long-Term Financial Plan, the government plans to obtain an additional PLN 5 billion in 2020 due to the abolition of the contribution limit.

“I think that this goal is impossible to achieve,” states Cezary Kaźmierczak, president of the Union of Entrepreneurs and Employers. “People are sensible. The abolition of the contribution limit means a radical increase in the burden on higher wages. This means that the employment contract will definitely become the least profitable form of employment and those who earn better will instantly switch to self-employment”.

The impact of lifting the 30-fold limit on salaries is particularly important in the context of the competitiveness of the Polish labour market. Already now, the IT industry is short of even tens of thousands of employees. Young people graduate in Poland and then look for employment abroad where they can count on the best financial conditions, including in terms of their remuneration. By abolishing the 30-fold limit, we would make the Polish market automatically less attractive not only to graduates of Polish universities, but also to talent from around the world.

“This is the root problem with the abolition of the limit,” emphasises Jakub Bińkowski, director of the Union’s Department of Law and Legislation. “We have been talking a lot about innovations, the fourth industrial revolution and start-ups, but way too often we forget what lies behind these great words: really highly qualified specialists who can make the Polish economy a truly competitive one. By abolishing the limit, we would reduce their real remuneration, and these are highly mobile people, so with their competences they can successfully look for a job anywhere in the world”.

The Union of Entrepreneurs and Employers is able to provided several examples of solutions that would serve to find an additional PLN 5 billion in the state budget. According to the Union’s experts, each and every one of them would be more beneficial to the Polish economy than lifting the 30-fold limit.

“The first and best solution would be to cut expenses,” stresses Cezary Kaźmierczak. “5 billion zloty in terms of the whole budget is not a staggering amount of money, so we would be able to achieve this goal by making precise savings. Another way out is to adopt a budget with a deficit – we praised the government for a balanced budget, but those few billion in minus would still be the best result in the history of the Third Polish Republic. The third is to look for income somewhere else, specifically in consumption, because taxes on labour are the worst ones”.

Representatives of the Union of Entrepreneurs and Employers appealed to the government to discuss the negative consequences of the potential abolition of the contribution limit and alternative possibilities to save several billion zlotys in the state budget.

 

22.10.2019 Statement of the Union of Entrepreneurs and Employers on the planned abolition of the 30-fold limit on Social Insurance Institution contributions

Warsaw, 24^th September 2019

 

The Union of Entrepreneurs and Employers evaluates positively – 
THE ACTIONS OF THE LAW AND JUSTICE GOVERNMENT IN TERMS OF ECONOMY
IN THE PREVIOUS TERM

 

The last four years were a time of unprecedented development for the Polish economy – largely due to the fantastic economic situation in Europe, but one cannot deny the government certain successes of their own. We positively evaluate the actions undertaken by the Law and Justice government in terms of the economy – these are the basic conclusions from the report of the Union of Entrepreneurs and Employers published today.

In the period from 2015 to 2018, we ‘caught up’ to the average European GDP per capita taking into account purchasing power parity by 3.6 percentage points. The average salary increased by 15 percent, and budget revenues, thanks to growing consumption and tightening of the tax system, increased by almost 35 percent.

“These indicators are certainly quite impressive,” says Cezary Kaźmierczak, president of the Union of Entrepreneurs and Employers. “The level of wealth of the Polish people increase over the past four years and that is an undeniable fact. Of course, we experienced the best economic situation in Europe in that period since the times immediately preceding the economic crisis, but the government cannot be denied its merits. The development of the economies of other European countries is a favourable circumstance, but insufficient on its own”.

According to the Union’s experts, within the last four years, one of the objectives set by Law and Justice was achieved: to increase the standard of living of the Polish people. In some respects, however, the summary of their four years in power is slightly worse.

“According to strategic and program documents of the ruling party, the transformation of the Polish economy into an economy based on knowledge and investments was supposed to be the government’s key achievement,” emphasises Marcin Nowacki, vice president of the Union. “Unfortunately, the investment rate in 2018 was significantly lower than in 2015, the share of high technology exports in total exports also decreased. The government talked a lot about the industrial revolution 4.0 and modern re-industrialisation, but the results of hitherto efforts to transform the economy are dissatysfying”.

The Union’s experts point out that it is a difficult task to unambiguously assess how the rule of Law and Justice influenced the regulatory environment for Polish entrepreneurs. Based on international rankings of recognised institutions, it is hard to draw any constructive conclusions – in some rankings, such as Doing Business, our position decreased; in others – such as Paying Taxes, it increased.

“One can say that for every good regulation introduced by the government over the last term, there was one bad regulation,” claims Jakub Bińkowski, the Union’s Secretary of Department of Law and Legislation. “Undoubtedly, adopting the Constitution for Business or subsequent deregulation packages were a success. At the same time, however, provisions closing the market were introduced, such as the ‘pharmacy for a pharmacist’ rule, or increasing the level of fiscal burdens, e.g. solidarity levy establishing a de facto third tax threshold”.

The main conclusion from the report is that Law and Justice managed to achieve their basic goal, i.e. increasing the level of Poles’ wealth, but they neglected modernising the Polish economy. As a result, the threat of the “medium development trap”, which was already mentioned in their political program in 2014, remains valid.

“The indicators speak for themselves: the last four years in terms of the economy were good. An equal number of regulations beneficial and disadvantageous from the business point of view were introduced. The strategic goal of transforming the economy was not achieved, but it is a hard task to execute during only one term. It seems that an adequate assessment of this government’s economic policy is B on a school scale,” sums up Cezary Kaźmierczak.

 

Download the report: 4 years of Law and Justice in power and the economy

Warsaw, 12^th September 2019

 

Entrepreneurs’ evaluation: raising the minimum wage has the greatest impact on business operations

 

The Union of Entrepreneurs and Employers together with Maison & Partners asked Polish entrepreneurs what their evaluation of the government’s individual actions is and how these actions affect their businesses. Entrepreneurs declare that it is the increase in the minimum wage what will among other things impact their businesses the most. At the same time, the government’s actions in this area are among the worst rated. Most importantly, the study was conducted before the ruling party, Law and Justice, made its plans regarding the increase public.

The survey was conducted by the Union of Entrepreneurs and Employers together with Maison&Partners among Polish entrepreneurs. In its first part, Polish companies were asked to present their perception of the impact of the political and economic situation on running business activity.

In spite of the emerging symptoms of the economic slowdown predicted by entrepreneurs (the Union’s “Busometr” survey for the 2^nd half of 2019), companies still perceive the general internal and global economic situation better than specific phenomena appearing on the horizon.

According to Polish companies, the government’s economic policy, and in particular the uncertainty of tax and economic law, have the most significant impact on their functioning. Even more pessimistic, entrepreneurs evaluate poorly the activities executed by the government in this area. Looking at the data gathered, one can also conclude that the Polish business environment is awaiting the results of the coming elections to the Polish parliament. In their opinion, the autumn elections may significantly affect their business operations.

Interestingly though, Polish companies do not perceive the ongoing Brexit process as an important factor that may disrupt their operation. The study showed that there are other changes in the external environment that are seen as more disturbing.

The Union of Entrepreneurs and Employers also asked Polish companies to express their opinion on the legislative changes, both already implemented and only announced, by the Polish government. The greatest impact on the functioning of enterprises would have the simplification of the taxation system and – in a negative way – raising the minimum wage. This last issue has also become extremely important in face of recent announcements of Law and Justice regarding a significant increase in minimum remuneration. One should stress that the Union’s study was conducted in July this year, that is before the announcements of plans for significant changes in this respect were made.

Legislative changes that the government has already implemented in recent years, however, do not seem to have such a significant impact on businesses as expected. The study showed that entrepreneurs did not strongly feel the impact of the amendments introduced, among others the act on payment gridlocks, reducing the CIT rate to 9%, changes in the Open Pension Fund system or introducing Employee Capital Programs. Exemption from Personal Income Tax for persons under 26 years of age is only in force since 1^st August this year, so entrepreneurs during the July survey did not yet feel the impact of these changes on their operations.

Entrepreneurs were also asked about their assessment of legal changes for business. Preferential rates of contributions to the Polish Social Insurance Institution (ZUS) and of Corporate Income Tax are well perceived by Polish companies as well as – despite only a moderate impact on business – the act on payment gridlocks. Companies evaluate every activity intended to simplify the tax system well.

On the other hand, the changes in the Open Pension Fund system, the implementation of Employee Capital Programs, the controversial PIT exemption for selected incomes of people under 26 years of age or plans to abolish the 30-fold limit for social security contributions are evaluated by entrepreneurs badly. The lowest-rated solutions also include raising the minimum wage. At this point, one must again stress that the surveyed entrepreneurs were not yet familiar with the “bold” plans of Law and Justice in this respect.

“Business operations vs the political and economic situation” is a study of the entrepreneurs’ perception and evaluation of new legislative solutions and the impact of the political and economic situation on conducting business operations in Poland. The study is a new project of the Union of Entrepreneurs and Employers and Maison&Partners.

The study was executed using the CAWI (Computer Assisted Web Interviews) method – an online survey panel. Sample size N = 609. The survey was carried out in July 2019.

The survey’s sample structure is representative for enterprises in Poland according to company size (micro, small and medium enterprises).

 

12.09.2019 Survey by the Union of Entrepreneurs and Employers: Business operations vs the political and economic situation

 

Fot. kschneider2991 / pixabay.com

Warsaw, 11^th September 2019

Position of the Union of Entrepreneurs and Employers on the announcement of the introduction of proportionality in Social Insurance Institution contributions for entrepreneurs

Out of all the postulates that were announced at the party convention of Law and Justice (Prawo i Sprawiedliwość) last Saturday, the announcement to make the amount of social security contributions for entrepreneurs depend on their income raised the biggest concern. This would entail a surge in burdens for an enormous number of entrepreneurs in Poland, including relatively well-paid freelancers and other representatives of the still weak middle class. We are therefore very relieved at the explanations of Jadwiga Emilewicz, the Minister of Entrepreneurship and Technology, according to which the proposal to change the rules for determining the amount of contributions to the Social Insurance Institution is only aimed at entrepreneurs with low incomes and currently benefiting from the preferences of the so-called “small social insurance”.

It goes without saying that for developed, well-functioning businesses, the flat-rate “social insurance” is a favourable model. Thanks to this solution, entrepreneurs with higher incomes pay contributions proportionally lower than full-time employees. Its justification is quite obvious – entrepreneurs themselves are responsible for paying the premiums, bear the risk of running their businesses themselves, and are also more willing to save funds on their own or to invest them.

The flat-rate social insurance has so far been a problem for two groups of entrepreneurs. Those who are just starting to run a business constitute the first group. The prospect of paying a fixed premium every month, regardless of whether it was possible to generate any income in a given period, has led many people away from starting their own business, and forced others to close down their business. However, this problem has basically been virtually eliminated, as entrepreneurs can pay social security premiums on preferential terms for 24 months (with a much lower contribution assessment basis), and they do not have to pay any social security at all for the first six months of running their business (they only have to cover health insurance premiums). As a result, newly established companies have two and a half years to reach the level of development that will allow them to pay social security contributions in full. It seems that this is more than enough time to determine whether a given business idea is right in a given market reality.

The second group of companies for whom a flat-rate social security is a problem are enterprises run “to be kept alive”, which by nature generate low income. They include all small services, people running economic activity not because they want to test themselves in business, but as a kind of substitute for a full-time job. The introduction of the so-called “small social insurance” which makes the amount of premiums paid dependent on the revenues generated would be key from their point of view. The Union of Entrepreneurs and Employers was in fact the initiator of the discussion to amend the model of premiums for the smallest companies. According to our original proposal, companies generating low revenues should be taxed with a uniform income-proportional levy covering social security premiums, health premiums and personal income tax. The legislator chose a slightly different and more complicated solution. As part the “small social insurance”, the entrepreneur calculates the average monthly revenue for the previous year and uses a special multiplier announced by the president of the Social Insurance Institution, thus obtaining the amount on which the premium is based. The system is constructed so that the lowest contribution basis is equal to the preferential contribution basis in force for the first 24 months of running the company.

We are relieved that the declaration that the modifications of the social security premiums towards proportional and income-dependent social insurance will concern the smallest activities covered by small social insurance. The social security system for entrepreneurs should be a combination of a lump sum applicable for developed companies with solutions aimed at proportionality of contributions for the smallest of companies. Thus the government’s declared direction of changes is correct.

To sum up, we would like to emphasise that any discussion about proportional social security contributions for all companies is extremely dangerous and potentially connected with a radical increase in levies imposed on Polish companies. It is, therefore, very good that the government is not planning any actions in this direction. At the same time, we share the diagnosis according to which a modification of the small social insurance model is necessary. We believe that in its present form it is imperfect. An unambiguous discussion whether it would be an adequate measure to replace the revenue-based mechanism with an income-based mechanism can only take place when the draft bill is made public. Regardless, we will soon publish our own amendment proposal addressing this area.

 

11.09.2019 Position of the Union of Entrepreneurs and Employers on the announcement of the introduction of proportionality in Social Insurance Institution contributions for entrepreneurs

Warsaw, 9^th September 2019

First symptoms of an economic downturn among entrepreneurs: the worst ever disposition towards investment, further optimism on the labour market

The index measuring entrepreneurs’ mood “Busometr” for the second half of 2019 amounted to 48.8 points (a decrease from 55.6 points in the previous half-year), which means that Polish entrepreneurs’ mood is deteriorating. There is still optimistic sentiment in the labour market segment of the index (57.1 points), but we have a complete decline in investments – 35.4. This is the lowest ever result in the history of the survey (since 2011) carried out by the Union of Entrepreneurs and Employers among entrepreneurs from the small and medium-sized enterprises sector.

Entrepreneurs from the manufacturing and trade sectors show the least worries about the economic situation over the next six months (in their case, the index reached 56.9 points and 50.7 points, respectively). On the flipside, entrepreneurs operating in the service sector show rather pessimistic moods (the value of the index here is 45.8 points).

The overall value of the Busometr Index was influenced, among others, by the “economic situation” component, which currently comes to the level of 49 points – a decrease can therefore be observed compared to the previous half-year when the value of the component was 55.2 points. As many as 31% of entrepreneurs expect the economic situation to worsen, whereas 42% assume that there will be no significant changes. The remaining part (27%) believe that the situation will improve.

“These may – but not necessarily – be the first symptoms of an economic downturn,” says Cezary Kaźmierczak, president of the Union of Entrepreneurs and Employers. “Entrepreneurs’ expectations that the economic situation will deteriorate after the boom we experienced are somewhat natural, especially since the mood indices of our neighbours to the West are getting worse. However, I’d like to emphasise that 69% of entrepreneurs claim the economic situation will not change significantly or even improve. It is therefore difficult to talk about fatalistic moods.”

Regardless of the size, region, sector and seniority of the company on the market, the mood of entrepreneurs in the area analysed within the “labour market” component is at an optimistic level (57.1 points). In the case of “remunerations”, the barometer reached 58 points, with 25% of entrepreneurs declaring an increase in remunerations. In terms of “employment”, 22% of respondents plan to increase it.

However, entrepreneurs’ moods are not that optimistic within the “investment component” – the latest reading is 35.4 points (a decrease by 9.6 points in relation to the previous Busometr survey). As many as 43% of respondents declare that they will invest in the next six months, while 57% do not plan any new investments. Small enterprises and those operating within the production sector are most optimistic about activities in this area. Micro-enterprises are far from making investment plans.

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

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

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

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

The survey is carried out since 2011.

 

09.09.2019 Busometr Index. Forecast for the 2^nd half of 2019

 

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