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ZPP Report: Polish tax system jeopardises the functioning and development of honest companies



21.06.2017



New, simple and clear act on the Goods and Services Tax, mandatory procedures of verifying the reliability of trading partners, rewarding tax clerks for robustness, rewarding tax payers for reliability, and obligation of issuing decision within 3 months from the moment of withholding VAT refund are some of the propositions of healing Polish tax system presented by Union of Entrepreneurs and Employers during the sitting of the Parliamentary Team for Supporting Entrepreneurs and Economic Patriotism in Polish Sejm.

We cannot let honest entrepreneurs to take responsibility for the swindles of criminals any longer. Therefore a series of changes ought to be introduced into the tax system rapidly. ZPP experts deployed these arguments during the presentation of the “VAT as a key problem of Polish Tax System” Report. In the paper, presented on Wednesday, 21st June 2017, authors put forward existing obstacles which render normal functioning of many of Polish companies impossible. According to ZPP, overcoming problems connected with the tax system would be beneficial for all of the market participants – it would result in possibility of employing more workers, in producing products of better quality and, as a consequence of limiting the bureaucracy, in providing cheaper products and services. 

Polish Tax System is very far from perfect, there is a common agreement to this fact. There are two critical areas in this system. The first one is the model of the revenue administration functioning, with special emphasis on its internal motivation system. The other one is applying problematic practices based on the existing provisions of law. They consist mainly of: withholding the VAT refunds, and shifting responsibility for tax frauds onto honest entrepreneurs – said attorney Jacek Cieplak, the Head of the Department of Legislation of ZPP.

According to the ZPP experts, the existing system of evaluating effectiveness of the tax control clerks, which rewards the amount of their adjudications is highly inefficient. In 2014, they descried improprieties which lowered the tax inflow by 10 602,3 million zloty. However, the corrected tax declarations increased the inflow only by around 410 million zloty. Therefore ZPP proposes rewarding tax payers for keeping to the time limits of submitting the declarations and for accuracy of their tax settlements. Moreover, in order to enhance the effectiveness of the revenue clerks, the last ones should be granted bonuses for increasing additional assets from the corrected declarations resulting from the improprieties pointed out during their proceedings. The bonuses should be granted solely after the decision in question comes into force.

Four specific cases of another problem of Polish tax system – common and long-lasting withholding of the VAT refunds by the revenue bodies – have been tackled within the Report. ZPP postulates introduction of obligation of issuing decision within 3 months from the moment of withholding the refund. The decision could be appealed to court, again with a 3-month term to solve the case. In case of failure of seeing to this obligation – of issuing a decision/presenting a judgement within the time limits – the decision/judgement shall be assumed as of the VAT refund. 

The revenue bodies do not cope with prosecuting criminals, therefore they shift the responsibility onto honest entrepreneurs. The mechanism of this shifting of responsibility is based on the common responsibility for the tax obligations. As a consequence, we are facing a situation where entrepreneurs operate in constant uncertainty because potentially criminals may start a VAT carousel in each branch of the market and get legally operating companies involved as buffers – said Maciej Letkiweicz, ZPP expert in the tax law. – Another problem is using by the revenue bodies collaterals of securing the entrepreneurs’ assets, mainly their bank accounts, which often causes their insolvency – he added. 

During the sitting, ZPP experts stipulated that the key solution which would limit the responsibility of honest entrepreneurs for the tax frauds of other entities would be establishing appropriate procedures. Provided that the tax payers fulfil all of those procedures, they could have legal certitude that they enter a transaction with an honest trading partner. Establishing an institution of a guardian of the secured assets would be the answer to the next problem. This institution should function in a way that the decision about securing assets would include a name of a guardian who would supervise the expenses from the blocked account, so the entrepreneur could still run his business activity.

We should use existing examples from abroad – Polish revenue system should be specialised and tax payers friendly, such as the Canadian one. It should also be equipped with modern analytic tools to better choose entities for inspections – like in Great Britain – recommends Maciej Letkiewicz from ZPP.

Union of Entrepreneurs and Employers also propounds starting works over new goods and services tax act. According to ZPP the existing regulations are so complicated that they have become, from an ordinary tax payer perspective i.e. the main target of this act, almost impossible. 

Raport ZPP VAT – kluczowy problem polskiego systemu podatkowego_pdf

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