3^rd December 2018

Poles divided on the trade ban, but for two free Sundays a month for all employees

As much as 71% Poles assume that the state should not determine how citizens spend theirs Sundays, and the ban on trade is perceived as violation of their consumer freedom, according to a survey by Maison & Partners commissioned by the Union of Entrepreneurs and Employers.

What is important, the demand put forward by the Union and the trade sector that instead of sectoral regulations, a statutory guarantee of two free Sunday per month be introduced for each employee in Poland enjoys very large support, of as many as 65% of all respondents. This way, thanks to efficient timetables, buyers would have the opportunity to shop on Sundays, and employees – a day off.

From the presented research, one can also conclude that regardless of their public perception, the provisions regarding trade restrictions on Sundays seem to be completely ineffective. It turns out that before the introduction of the new regulations, 88%of Poles did their shopping on Sunday, whereas now it is 80%, and they complain about high prices and limited range. A loss of merely 10% means that the restrictions cover only a small part of the trade sector.

“Interestingly, among the opponents of trade restrictions on Sundays, a significant group are those who are currently working in this sector,” emphasizes professor Dominika Maison. “44% of them negatively appraise any restrictions whatsoever. However, within the group that has never worked in this industry, the percentage of opponents of restrictions amounts to 37%. Similarly, the restrictions of trade on Sundays is perceived as a hindrance by 51% of employees in this industry and only 36% of those who have never worked in this trade.”

As one can read in the report based on the results of the study, the regulations in force since 2018 limiting trade on Sundays are supported by 43% of respondents, and 42% of respondents oppose them. At the same time, the solution to come into force in 2020, resulting in an almost total ban on Sunday trade, is negatively perceived by as many as 65% of Poles. Interestingly, two groups dominate among these opponents, according to their place of residence. It should not be a surprise that one of them are the inhabitants of large cities, over 500,000 people, out of which exactly one out of two opposes the restrictions of trade on Sundays in any form. However, it turns out that the biggest group of opponents of these restrictions are residents of small towns, up to 20,000 inhabitants.

“In this group, over half of the respondents negatively appraise any restrictions on trade on Sundays,” – notes Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers. “It means that the further this restriction goes, the worse the reception will be in smaller towns. The result may be surprising, but we must remember that in small towns a visit to a shopping centre is quite often the only form of entertainment available at the weekend for the average citizen. If people are forbidden to spend their free time in this way, it is no wonder they refer to these changes negatively.”

 

Survey by Maison & Partners commissioned by the Union of Entrepreneurs and Employers: Attitudes and opinions regarding the restriction of trade on Sundays

 

 

Warsaw, 26^th November 2018

 

Position of the Union of Entrepreneurs and Employers on the digital services tax

 

On 21^st March 2018, the European Commission presented a proposal on taxation of digital economy. The Commission presented both a short-term measure – Digital Services Tax (DST) – and a more comprehensive, long-term proposal. In this letter, we will not refer to the latter proposal of a long-term solution regarding the taxation of international Internet operations.

We would like to focus on the short-term proposal. In the light of the lack of international consensus on taxation of digital activities, the European Commission put forward a proposal providing for the imposition of a temporary special-purpose tax – DST – of 3% on the revenues of enterprises from:

• sales of online advertising space,
• data generated by users,
• digital brokerage services that enable users to interact with each other.

The tax to be paid in Member States, where the users are located, would apply to companies whose annual revenues generated on the international market exceed EUR 750 million and EUR 50 million on the EU market. Although the vast majority of members of the Union of Entrepreneurs and Employers – ZPP are companies from the SME sector that do not achieve the revenues assumed by the EC, we believe that the new tax will affect these enterprises. We are afraid that the tax will be transferred through digital platforms to European citizens and entrepreneurs, which in turn will increase their operating costs, reduce their competitiveness, and their ability to innovate.

The SME sector is responsible for most of Poland’s economic growth. There are over 2 million entrepreneurs employing up to 250 employees. They generate over 60% of GDP and are responsible for over 70% of jobs – almost 3 out of 4 Poles work in such companies. For these enterprises, the Internet is not only a way to attract customers, but also is indispensable for their competitiveness. The main benefits achieved by SMEs on the Internet include, among others:

• reduction of costs of locating and purchasing materials, parts and other necessary resources,
• improved efficiency of production and delivery of goods and services by maintaining lower stocks in warehouses or better cooperation between designers of new products working in different (usually remote) locations,
• lower costs and increased customer service efficiency,
• increased competition in many markets, which necessitates the implementation of ever more modern solutions allowing for further reduction of costs and increase in the efficiency of operations,
• faster and more efficient flow of information within the organisation as well as more efficient communication with external partners,
• enhanced flexibility of work, new methods of work management increasing the efficiency of employees,
• new technical and IT solutions improving work in the organisation and reducing infrastructure investments (e.g. remote teams, working in the cloud etc.).

Pursuant to the above-listed benefits, SMEs can compete with the largest market players as well as offer better and more innovative services and products.

The Union acknowledges that although the new regulation is not directly targeted at SMEs, it will affect their activities. We believe that decision makers should consider the risk that the additional costs resulting from the operation of digital platforms will be transferred to European citizens and entrepreneurs. Such an expected increase in costs from operations conducted on the Internet, which is an increasing part of their functioning, will increase their operating costs. This is confirmed by the OECD’s “Tax Challenges Arising from Digitalisation – Interim Report 2018”, which noted that “an interim measure will increase the cost of capital, reducing the incentive to invest with a resulting negative effect on growth”. It also adds that “a measure only applicable to digitalised sectors risks slowing down investment in innovation for those businesses that are subject to the tax or indirectly affected by it”.

This is particularly important in the absence of an international tax agreement. The unilateral imposition of a digital tax on European enterprises, in the absence of such a tax in other parts of the world, will negatively affect the ability of Polish and European companies to compete with non-EU entrepreneurs (e.g. from the Americas, China or India). As a result, if future revenues are taxable, potential investors, e.g. in a technological startup company, will be willing to lower the proposed valuation and the chances of finding an investor in the company will decrease. We would like to point out that the increase in operating costs applies not only to technology companies, but to every entrepreneur who operates on the Internet. The new tax will increase the costs of marketing, advertising or reaching new customers.

The assurance of EU decision-makers concerning the steps taken to prevent the burden being passed on to SMEs is not credible in our opinion. We would like to remind that the entry into force of the General Data Protection Regulation was supposed to hit big Internet corporations, and recent analyses have shown that the largest adjustment costs are borne by small and medium enterprises. Big corporations employing hundreds of well-paid lawyers will always manage. Besides, that it is difficult to mitigate the risk of transferring costs to clients / SMEs was shown in the case of the bank tax, which was also to be a burden for banks and was transferred on to their clients.

Additionally, the Internet economy sector is one of the most innovative and fastest growing parts of the Polish economy. ZPP fears that the increase in costs associated with running a business will negatively affect the innovation of these companies and, as a result, will reduce Poland’s economic growth.

Furthermore, it is estimated that when determining a 3% tax rate, the new tax could generate EUR 5 billion per year for Member States. However, the EC did not present what part of these funds would be allocated to Poland. The Union expresses its concern that the expected fiscal effect will not offset the negative effects on the Polish economy.

In view of the above, we call on the Polish authorities, in particular the Ministry of Finance, which represents Poland in these negotiations, to present analyses how the new burden will affect the SME sector and impact its competitiveness. We believe that any proposals for introducing new business taxes must be supported by credible, public evidence, not only regarding fiscal and budgetary influence, but also analysing the broader economic context, such as competitiveness, innovativeness of the economy and economic growth.

The Union of Entrepreneurs and Employers believes that only after carrying out the above-mentioned analyses, Poland will be able to fully deliberately decide on further steps regarding the so-called digital tax.

 

26.11.2018 Position of the Union of Entrepreneurs and Employers on the digital services tax

 

Fot. geralt/pixabay.com

Warsaw, 6^th November 2018

 

The outflow of immigrants from Ukraine to the West is a real threat to the our economy – Poland may lose up to 1.6% GDP

 

Poland faces a real problem related to the risk of a significant economic slowdown, which may be caused by the outflow of over half a million workers from Ukraine to Western Europe. According to experts of the Union of Entrepreneurs and Employers, avoiding such a scenario will be possible if a coherent migration policy is created, largely with a wise absorption of economic migrants from proven directions in mind.

This topic was discussed in a broader context in the memorandum titled “The worst case scenario takes place – will Poland lose employees from Ukraine to Germany”, presented by the Union of Entrepreneurs and Employers on November 6^th this year during a press conference.

“We are anxiously observing the situation related to the insufficient supply of labour in Poland, and hence the related lack of workforce, which is increasingly often publicised in nationwide media. Since 2016, we have been calling for a coherent migration policy with procedures for employing Ukrainian citizens simplified to the maximum extent, as well as from other nations whose representatives are already working in Poland and contributing to the creation of GDP,” says Jakub Bińkowski, Secretary of the Law and Legislation Department at the Union of Entrepreneurs and Employers.

In his view, the next step in the economic context related to taking care of shortages on the labour market is to create a transparent path to obtain the right of permanent residence, and later citizenship for immigrants from countries east of the Polish border.

As one can read in the Union’s memorandum, “according to the estimates of the National Population Council, by 2050 Poland should receive 5 million economic migrants to maintain the current pace of economic development”.

Experts of the Union of Entrepreneurs and Employers agree that the continuation of the good economic situation will not be possible thanks to only short-term actions consisting in satisfying the country’s current needs and attracting immigrants for a short time, for example, due to the seasonal increase in labour demand.

“Virtually all EU member states, suffering from significant shortages of the working age population, are facing an analogous challenge. This is a very big threat not only to the current pace of economic development, which must decrease in a situation when fewer and fewer people are working, while more and more are on pension benefits, but it is also a threat to the stability of the pay-as-you-go pension system, and consequently – the situation of state budgets,” comments Tomasz Wróblewski, President of the Warsaw Enterprise Institute. “It is then no wonder that other European countries are very keen on acquiring a large group of immigrants taking up paid employment who assimilate easily.”

The introduction by Western countries of visa-free travel for workers from Ukraine, effective from 11^th June 2017 (Ukrainian citizens do not need visas to enter the EU, this entitlement has been limited to 90 days over a period of 6 months, and trips can take place on business, tourist and family purposes), caused that in the first month of the new regulations being in force, the EU border was crossed visa-free by over 95,000 Ukrainians. At the same time, the dynamics of economic migration to Poland from the Eastern direction dropped significantly – data from the Ministry of Labour and Social Policy show that in the first half of 2018, 13 percent fewer statements were registered concerning the intention to entrust work to a foreigner compared to the previous year, which is a reversal of the trend from the last few years, i.e. in principle a continuous increase in the number of registered declarations.

“The Union of Entrepreneurs and Employers for many months presented its recommendations regarding the creation of a programme aimed at retaining economic migrants from Ukraine and other eastern countries in Poland. Unfortunately, we state with concern that Germany today is preparing to open its market for employees from outside the European Union. The German government wants to increase the inflow of qualified labour force while adjusting it to the needs of the labour market – the overriding objective here is to secure employees with vocational education,” says Katarzyna Niemyjska, Director of the Law and Legislation Department at the Union of Entrepreneurs and Employers. “Germany, as a result of a quick and simple procedure, is to recognise qualifications acquired outside the EU, to carry out extensive promotional activities encouraging people to work in Germany, and to offer support in learning the German language.”

The implementation by the Germans of the plan they presented will have a particular impact on the Polish economy. It can be assumed, and there are studies on this subject, that a large part of workers from Ukraine staying in Poland will decide to move to the West. This means an outflow to Germany of a large part of the labour force we need, which will cause great difficulties for entrepreneurs, but also macroeconomic problems. According to the Union’s estimates, in a moderate scenario assuming the outflow of 500,000 immigrants from Ukraine from the labour market, the potential GDP loss will amount to 1.6%, which is equivalent to 1/3 of the GDP growth dynamics in 2017. In the context of the imminent economic slowdown, this loss would be even more severe.

According to the Union, there is need for urgent governmental activity aimed at the implementation of measures to prevent the situation when a significant shortage of workforce in Poland becomes a fact and significantly affects the situation of entrepreneurs who will have difficulties conducting their businesses with a large number of job openings, while consumers will have to pay more for the same services and products. As a result, the state will also lose, because Ukrainians spend their money in Poland and their wages are normally taxed.

 

Memorandum of the Union of Entrepreneurs and Employers – “The worst case scenario takes place – will Poland lose employees from Ukraine to Germany”

 

 

Fot. skeeze/pixabay.com

Warsaw, 30^th October 2018

 

Polish Federation of Food Industry becomes member organisation of the Union of Entrepreneurs and Employers

 

The Polish Federation of Food Industry Union of Employers joined ZPP – the Union of Entrepreneurs and Employers. The organisation was established to ensure effective participation of business entities in creating legal, organisational and economic conditions for the development of the food sector – one of the largest and strongest branches of the Polish economy. PFFI members are leading companies and organisations present on the broadly understood food market in Poland. For many years, the Federation has been helping its members build their strong position on the market. Companies associated in PFFI employ 40,000 employees.

PFFI bases its activity on three basic pillars:

• Organisation – only by acting together, companies can effectively represent their positions,
• Cooperation – creating a unique platform for cooperation between companies,
• Influence – PFFI representatives actively present positions and opinions developed in the working committees of the Federation.

Poland’s integration with the European Union set new challenges for Polish enterprises. Since 1999, the Polish Federation of Food Industry Union of Employers is the only Polish organisation that has membership status of the largest organisation of EU’s food producers, the Confederation of Food and Drink Industries of the EEC (FoodDrinkEurope).

PFPŻ represents the Polish food industry at the institutionalised forum of the entire food industry in the European Union. It monitors and informs affiliated companies about any and all changes in EU food regulations, and since 2004 it enables Polish enterprises to actively participate in shaping them.

 

Fot. rawpixel/pixabay.com

Warsaw, 29^th October 2018

 

The fight again the tobacco grey zone

 

Smart excise policy, regulatory solutions that tighten tobacco cultivation and drought trading regulations, as well as intensified operations by authorities – these are the factors that made it possible to reduce the grey zone of tobacco products by around a half over the last 3 years – according to the fourth Business Paper of the Union of Entrepreneurs and Employers.

According to common knowledge, the grey economy is a very unfavourable phenomenon for the economy. Particularly vulnerable to fall victim to it are those sectors where non-compliance pays off best and unpaid taxes are highest. One such sector is the tobacco market. High increases in excise tax on cigarettes resulted in the fact that in 2011, excise duty per an average packet of cigarettes amounted to about PLN 6, in 2015 it was already more than PLN 8. The VAT burden also grew along with excise duty increases. Those high tax increases were not accompanied by an increase in budget revenues, which, on the contrary, were decreasing.

“Up until 2015, the government in spite of our clear warnings, stubbornly increased the excise duty on cigarettes, although it was obvious that it would not result in higher revenues,” says Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers – ZPP. “There was less and less money from tobacco excise, while the grey zone grew unchecked, from 13.9%. in 2011 up to 19% at its height in 2015. This clearly affected the legal cigarette market, which in this period shrunk by a quarter.”

At the same time, no significant legislative initiatives to tighten the system took place. Point measures were carried out, such as the taxation of dried tobacco with excise duty, but they were completely inadequate.

“The legislator’s limited activity definitely contributed to the increase of the informal economy until 2015,” says Marcin Nowacki, Vice-President of the Union of Entrepreneurs and Employers. “One would react to threats in a completely inadequate manner, introducing small, singular changes, limiting the effects of negative phenomena on the market such as, for instance, the once popular “party cigars”, but it was a drop in the ocean of needs. As a result, the grey zone of tobacco for smoking reached the level of up to 60% of the market volume.”

According to the Union’s estimates, in the years 2011-2015, the Polish state budget lost due to the tobacco produce grey zone as much as approximately PLN 25 billion in revenues.

In 2015, however, a significant change in policy took place that went beyond a simple correction. First of all, the excise tax hike was stopped. One ought to make note of the fact that in Poland it exceeds the minimum levels required by the European Union.

“For years, we have been repeating that further increases in excise tax on cigarettes will do no good, and they will even be counterproductive. The authorities eventually took it into due consideration and gave up the nonsensical increases, the result of which was visible almost immediately,” said Cezary Kaźmierczak.

Nevertheless, merely stopping the increases would not bring satisfactory results. It was necessary to take legislative action and this was precisely what happened. A number of duties and regulations were introduced regarding intermediary tobacco operators, excise security, as well as monitoring of both crops and raw tobacco trading. An obligation for all producers of raw tobacco to register themselves in a special registry was introduced.

“It turned out that it was possible to tighten the system in a regular and organized manner,” emphasises Marcin Nowacki. “Moreover, reconnaissance and operational privileges were granted to customs services, which led to the fact that in 2016, five times more illegal cigarette factories were closed down than in 2014.”

The results of the activities carried out, both in terms of excise policy, as well as legislative proposals and changes concerning authorities, are all very positive – the share of informal economy in the cigarette market fell by 6.7 percentage points, while legal market grew by almost 3%, revenues from tobacco excise duty increased by PLN 1 billion a year. Thus, we managed to reverse all negative trends caused by misguided policies of previous years.

Despite the policy’s good results, the threat of the grey zone is still real, as new risks are already on the horizon, such as the ban on the sale of menthol products. Both those products and the recommendations of the Union of Entrepreneurs and Employers in this scope will be discussed in a comprehensive report, the publication of which is planned for November this year.

 

29.10.2018_Union of Entrepreneurs and Employers Business Paper_The fight again the tobacco grey zone

Warsaw, 26^th October 2018

 

Commentary of the Union of Entrepreneurs and Employers on the adoption by the Polish Sejm of the Act introducing the third income tax threshold and eliminating the flat tax for business and the introductory law of the so-called exit tax

 

On 23^rd October 2018, the Sejm of the Republic of Poland voted on and adopted the government bill amending the act on personal income tax, the act on income tax for legal persons, the act – Tax ordinance and some other acts (document no. 2860) and the government bill on the Solidarity Support Fund for the Disabled (document no. 2848).

Both projects were subject to thorough criticism of many participants of public consultations, including ZPP – the Union of Entrepreneurs and Employers. The first of them assumes the introduction to the Polish tax system of a number of changes of very important character for business entities related to, among other things, the issue of reporting tax schemes or changes related to the tax law circumvention clause. With these are actions, the legislators intended to tighten the tax system and increase the budget revenues, but in practice they may be dangerous for taxpayers. Moreover, as part of the project, the legislator introduces the so-called exit tax, according to which income from unrealised profits would be taxed. This means a de facto taxation of an asset transfer out of Poland, as a result of which the Polish state loses in whole or in part the right to tax income from the sale of this asset, as well as the change of tax residence, as a result of which Poland loses in whole or in part the right to tax income from the sale of an asset owned by the taxpayer in connection with the transfer of his place of residence to another country.

This is a solution resulting, to some extent, from the ATAD directive – however, the Polish legislator decided to implement the provisions in a stricter manner with respect to the minimum requirements set out in the directive, including taxation also for individuals who do not run a business.

It is noteworthy that the adopted project was separated from a larger project, which had previously been the subject of public consultations and contained a number of other solutions, including preferential taxation of income from intellectual property rights or a change in the tax settlement of lease instalments costs. In the course of consultations, the Union of Entrepreneurs and Employers submitted a critical position to the project, highlighting some of the unfavourable solutions, and criticising the fact that the Polish legislator decided to implement the ATAD directive in a hurry, making the consultation process essentially illusory (only two weeks to submit comments to a very extensive project, while consulting the new Tax Ordinance at the same time), although the time for transposition does not pass until the end of 2019. Our position in this respect remains unchanged – we strongly oppose the introduction of the new tax solutions, so deeply interfering with taxpayers’ interests, in such a short time, without taking into account any of the comments made in the course of public consultations, and without an in-depth analysis or discussion of CJEU jurisprudence concerning the exit tax concept and its influence on the final shape of Polish regulations.

During the same plenary session, a second bill was also passed – on the Solidarity Support Fund for the Disabled. This fund is to be financed from contributions levied on employees’ remuneration and a new tax at the rate of 4%, whose taxpayers will be persons with annual income of at least PLN 1 million. It is worth noting that the amount of the said contribution has not been specified in the Act – it is to be determined on an ongoing basis in the Budget Act. In fact, the Polish legislator, under the pretext of creating a new Fund (largely identical with the existing PFRON – State Fund for Rehabilitation of Disabled People), decided to increase non-wage labour costs (what is worse – in the amount not permanently specified in the Act), as well as the liquidation of the linear income tax from business activity and the introduction of a third tax threshold at the level of one million zlotys. The Union of Entrepreneurs and Employers has already strongly criticised this idea several times, pointing to its anti-development character, as well as the danger of introducing far-reaching changes in the future, aimed at creating a progressive system of income taxation in Poland.

To sum up, on 23^rd October, the Polish Sejm adopted two bills introducing significant changes that are unfavourable for taxpayers. As is clear from the voting information, unfortunately, only a few MPs opposed these initiatives, which we leave for consideration in the context of the upcoming parliamentary elections.



Fot. Photo RNW/ na lic. Creative Commons/ flickr.com

Warsaw, 10^th October 2018

 

Position of the Union of Entrepreneurs and Employers on rising energy prices 

 

Electricity prices constitute a very important parameter for all participants of a state’s economy. For entrepreneurs, naturally, expenditures on electricity embody a cost that is particularly acute for production enterprises with high energy consumption. For distributors, rising electricity prices mean higher risks (these entities become, in principle, hostages of the situation they found themselves in – they distribute a product whose prices grow in a fashion completely independent from them). From the point of view of a consumer, more expensive electricity (ergo higher costs of enterprises) is associated with an increase in the prices of products and services. In addition to all of the above, everyone obviously uses electricity also at home, independently from their economic activity. In connection with the above, rising electricity prices are no good piece of information for market participants. Therefore, it is necessary to consider the reasons behind this phenomenon and potential ways of solving this very problem.

Offer prices for energy sales for 2019 for business oscillate at a level, depending on the specifics, circa PLN 350-480 per one megawatt hour (1MWh), whereas this year the business was getting electricity for PLN 210 per 1 MWh. This means that next year at least a large part of entrepreneurs will have to pay for electricity more than a half more than they paid over the present year. This state of affairs will not remain without impact on the entire economy, including – which seems to be particularly sensitive from a political point of view – the situation of consumers and households. Therefore, drastic increases in electricity prices have recently become such a popular topic in the media.

First and foremost, it should be noted that the problem is not of a temporary nature. A transient increase in electricity prices would obviously be worrying at the time, but in the long run, it would not have significantly impacted the economy. However, according to estimates of the Institute for Renewable Energy, after 2020, Poland, having set up an energy mix based in half on coal and supplemented with nuclear energy and renewable sources, will have the highest in Europe wholesale energy prices and tariffs for all recipient groups. Such forecasts indicate that the problem of rising energy prices in Poland is of a strategic nature and does not constitute only an interim economic hardship.

As for the reasons for rising electricity prices, one must state that they are largely external and, as a rule, independent from Polish decision makers. One of the basic reasons mentioned by analysts is a drastic increase in the prices of CO₂ emission fees.

Within the European Union, there is a system of emissions trading, which is a de facto key element of the Community’s climate policy. It consists in the fact that every year, there is a certain number of CO₂ emission permits on the market. Such a permit gives the holder the right to emit one metric tonne of carbon dioxide. In 2013, the number of 2,084,301,856 permits was established, which until 2020 will be decreasing annually at the rate of 1.74%, and from 2021 to 2030, by 2.2 %. Emission permits are allocated to companies through auctioning and can then be sold on the open market by means of a stock exchange. In the autumn of 2017, the price of one permit equalled on average approximately EUR 6. At the moment, the price has increased to EUR 25, and in the near future, it is not entirely impossible that it breaks the level of EUR 30, and some analysts mention the possibility of reaching the level of EUR 100 in the long term. The Polish power industry, based in 85% on coal, is additionally high-emission (about 770 kg of CO₂ per one megawatt hour, whilst in Germany, it is only about 420 kg per 1 MWh), which means that changes in the prices of permits for CO₂ emissions directly translate into energy prices in our country. In the long term, the problem may turn out to be even more severe, as due to the fact that Poland had surpluses of CO₂ emission permits, some producers received them for free. In the near future, these entities will have to participate in auctions, which means an increase in demand for permits, and therefore a further increase in prices.

Considering the above, one must not forget about the second, no less important, component of the problem, that is coal prices. At the beginning of July this year, coal prices in Australia exceeded the level of USD 120 per metric tonne. Coal was so expensive for the last time in 2012. The increase in coal prices is almost directly attributable to China’s growing demand for this raw material. Undoubtedly, there are several reasons for the increased demand – analysts indicate, among others, an exceptionally warm summer, but it is not without significance that Chinese industry is growing dynamically, and at the same time, China does not have any CO₂ emission limits adopted by EU countries. Coal prices on world markets are very important for Poland, as about 20% of the raw material used in the country is imported. Coal mining in Poland is expensive, because it comes from proper mines, not strip mines, as it is in Australia.

To recapitulate, in view of the current perturbations on the global markets, two unfavourable factors – from the point of view of energy prices in Poland – accumulated, which are: the increase in the prices of permits for CO₂ emissions and the increase in coal prices. At the same time, more and more expensive electricity in Poland is at the moment only part of the problem, because, in the long term, we can even expect a gap in electricity supply. According to estimates, our demand for power may increase by 2030 from 26 gigawatts to 33 gigawatts. Simultaneously, there are no new power plants in Poland that could meet growing needs for energy, and more than 60% of existing installations are already this old that soon they will no longer be able to continue their operations. Consequently, the power grid in Poland requires far-reaching and continuous modernisation, which would cost the budget tens of billions of zlotys.

Taking into account the above facts and forecasts, one must admit that the discussed situation has a direct negative impact on the competitiveness of the Polish economy. Within a few years, we may have the most expensive electricity in Europe, and already at the moment, large customers pay significantly more per one megawatt than other countries in the region (approximately EUR 69 in Poland vs. EUR 57 in the Czech Republic or EUR 38 in Germany). This, of course, translates into operating costs of enterprises, their competitive position relative to other European entities, product prices, and ultimately also into the costs of maintaining a household. No wonder, then, that the problem was addressed by both the Ministry of Energy, which explained the reasons behind higher prices, as well as the largest Polish energy companies that discussed their investment plans during the proceedings of the Energy and Treasury Committee of the Polish Sejm.

Pursuant to the above-mentioned facts, we consider it reasonable for the government to conduct remedial actions as part of the formulation of Poland’s energy policy. Therefore, we draw attention to the need to create a framework and to stimulate the formation of energy clusters, i.e. agreements concluded by means of contracts between locally operating entities that deal with the production, consumption, storage and sale of, among others, electricity (but also heat or fuels). Investing in distributed energy, as well as improving the regulatory framework for energy clusters (the definition of a cluster was only introduced into our legal system in mid-2016, and is, therefore – from a legal point of view – a relatively young formula), becomes necessary to balance future demand for energy – clusters concentrate in different energy sectors, and by strengthening the decentralisation of production, storage and supply, they also significantly reduce the risk of a blackout.

At the same time, efforts should be made to increase the share of “green” sources in the Polish energy mix, including in particular wind farms, along with those built on the sea. This is a de facto necessity resulting from both permanent and objective conditions, such as inefficient methods of extracting the key raw material for the Polish energy industry, which is coal and growing demand for electricity, with insufficient number of production units, as well as political conditions resulting from climate regulations adopted at the level of the European Union. For this reason, in order to maintain the competitiveness of Polish entities on international markets, we call for – apart from reacting to the current situation – long-term and strategic activities.

 

Union of Entrepreneurs and Employers

 

Fot. magro_kr/ na lic. Creative Commons/ flickr.com

Warsaw, 11st October 2018

We’re opening the Freedom Lounge

 

In the former headquarters of the Communist Party, the building in the very center of Warsaw that housed the Central Committee of the Polish United Workers’ Party, the Warsaw Enterprise Institute opened the Freedom Lounge. It was created with conservative and free-market youth in mind – a place where youth organizations will be able to organize their events free of charge, use the in-house television studio, develop of their professional careers, as well as for socializing and entertainment purposes. WEI will help them successfully achieve their goals.

The Freedom Lounge consists of three levels. The underground floor is where the conference room for 60 people is located, on the ground floor, there is a bar and canteen, whereas on the mezzanine, there will be a television studio.

We would like to invite all ambitious young people to cooperate with us. If you are interested in this project, please contact Tomasz Kołodziejczuk – t.kolodziejczuk@wei.org.pl, +48 661 616 522.

We would like to thank our partners – Orange, PKP Energetyka, the PGNiG Foundation, Philip Morris – and other companies and institutions that supported us in this undertaking.

Since the Liberty Lounge is located in the building that once used to be home to the Central Committee of the communist Polish United Workers’ Party – we may also speak of personal satisfaction, as we ourselves contributed into fighting against this place’s previous tenants.

 

 

Cezary Kaźmierczak, Union of Entrepreneurs and Employers
Tomasz Wróblewski, Warsaw Enterprise Institute

Warsaw, 26^th September 2018

 

Busometr ZPP Index:
Entrepreneurs in a good mood – record-high Busometr index

 

In entrepreneurs’ view, the Polish economy is in a good condition. This is indicated by the latest forecasts of the Union of Entrepreneurs and Employers discussed in the next edition of the Busometr Index survey, which had a reading of 56.8 points. This result is 12.13 points higher compared to the results from the 1^st half of 2018.

The overall value of the Busometr Index was influenced by the “economic situation” component, which currently stands at 55.4 points. One can see a significant increase here compared to the 1^st half of this year (when the value of the component stood 41.75 points). As many as 39% of entrepreneurs are of the opinion that in the months to come the economic situation will improve, while 25% expect it to deteriorate.

It should be emphasised that from this measurement on, the Busometr index is realised using a different business database (previously, this used to be the database of the Union of Entrepreneurs and Employers – ZPP; currently, that of the Ariadna National Research Panel). The sample structure in terms of the size of the companies surveyed in this measurement and the previous ones does not differ, but the demographic structure of the respondents has changed considerably. This change may be partly responsible for the observed increase in indices.

“In the latest edition of the study, we have noticed a very dynamic growth in every indicator analysed as part of the Busometr Index,” comments Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers. “Perhaps the change in the demographic structure of the respondents has impacted the situation, but undoubtedly the reading results for the 2^nd half of 2018 reflect a clear trend: entrepreneurs observe excellent economic conditions and are willing to make use of them, for instance, by investing their money.”

The least concerned about the economic situation in the country, in terms of the next six months, are entrepreneurs from the commerce sector (here the index reached 61.32 points), followed by production and services sectors (59.11 and 51.06 points, respectively).

The value of the ZPP Busometr Index was also influenced by the other two components – the labour market and investments.

Regardless of the size, region, sector or the age of an enterprise, the moods of entrepreneurs in the area examined in terms of the component “labour market (wages and employment)” is at a decent level of 61.9 points. In the case of “wages”, the barometer amounted to 62 points, with 43% of entrepreneurs declaring an increase in remuneration in the near future. In terms of “employment” 42% of respondents plan to increase it.

“The fact that almost half of entrepreneurs plan pay rises, is not at all surprising,” claims Cezary Kaźmierczak. “We are dealing with insufficient labour supply today, entrepreneurs are competing for employees, hence wage increases are natural. Due to the good economic climate and dynamic growth in consumption, companies can afford to offer higher wages.”

A significant increase can also be seen in the “investments” component – the latest reading is at 53.7 points. (increase by 10.24 points with respect to the previous Busometr measurement). As many as 64% of respondents declare that they will invest over the next six months, while 36% of respondents do not plan to invest. Medium-sized and large enterprises as well as enterprises operating within the production sector are most optimistic in this respect (63.1 points).

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Busometr ZPP – the Index of Economic Mood in SME Sector is an economic barometer illustrating the level of optimism in small and medium enterprises, and their plans for the coming 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 Research House conduct the research among a representative group of small and medium enterprises (up to 250 employees). Busometr ZPP is published every six months.

Small and medium enterprises constitute in Poland 99.8% of all the companies in the country. They create three quarters of the work places and generate 67% of GDP.

 

26.09.2018 ZPP Busometr Index. Forecast for 2^nd half of 2018

Warsaw, 19^th September 2018

 

The economy and state budget are in good shape

 

 

Both the financial situation of the budget and the results achieved by enterprises are getting better, as the latest Business Paper by the Union of Entrepreneurs and Employers regarding the financial condition of the Polish economy describes. However, there are threats appearing on the horizon.

The financial condition of an economy can be analysed from two angles. The first is the issue of the situation of public finances. In this respect, Poland has seen a clear improvement recently. With a gradual increase in budget expenditures, revenue increased even more, especially in terms of VAT.

“One can clearly see the results of the coexistence of two factors, i.e. the excellent economic situation, manifested by the increase in internal demand and the tightening of the tax system in the field of counteracting extortion of VAT refunds,” says Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers. “These two elements have significantly contributed to the reduction of the deficit, as the revenues from taxes on goods and services constitute the main component of budgetary tax revenues,” he adds.

In 2017, the lowest budget deficit was achieved in ages. At the same time, however, due to the excellent economic situation in the world, some countries have recently recorded a budget surplus, while in Poland a long-term deficit has been maintained for a long time. As a result, the debt of the public finance sector is growing, even though the situation of the budget recently can be described as good compared to previous years. While indirect taxes, in particular VAT, are of key importance to budget inflows from the point of view of revenues to the budget, the greatest threat to the stability of public finances seems to be the expenditure related to the execution of compulsory social security benefits, which are already the most important component of budget expenditures (in 2017, we spent almost twice as much on them than on family benefits, including 500+).

Apart from the relatively good situation of the state budget, attention should be paid to the financial condition of enterprises. Their revenues have recently increased dynamically, although large companies play a major role in this respect. It is enough to mention that in 2017, they achieved an average income of PLN 578 million, while medium-sized and small companies achieved an average income of PLN 29 million. At the same time, micro-entrepreneurs could in 2016 boast an average revenue of PLN 520,000 – merely four years earlier, this was only PLN 460,000. Therefore, there is no doubt that economic entities of all sizes are achieving higher and higher revenues, however, the disproportion between SMEs and large enterprises is very large, which naturally results from the specificity and scale of their operations. Interestingly, in small companies we can observe a slightly higher share of wages in total costs than in the case of large entities.

“Revenues of business entities are growing regularly, but we have in fact experienced increased dynamics recently,” says Jakub Bińkowski, Secretary at the Department of Law and Legislation of the Union of Entrepreneurs and Employers. “The result thereof is that entrepreneurs have accumulated a record amount of savings on their bank accounts. At the same time, micro-enterprises have a relatively small share in the revenues generated by companies in spite of a clear advantage in terms of their number.”

To sum up, Polish economy is clearly gaining from the excellent economic situation, from the resourcefulness of Polish entrepreneurs, as well as from the tightening the tax system. However, the question remains unanswered whether – especially in the area of budgetary discipline – are we taking advantage of the current conditions to a sufficiently high degree.

 

19.09.2018 Business Paper by the Union of Entrepreneurs and Employers – Financial condition of the Polish economy

 

 

Fot. Martin Henriksen / tempest.dk