Warsaw, 22nd 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.