Poland’s current tax system is “unfair” because “the rich use our roads and schools” but “do not pay [an amount] appropriate to their earnings”, says Prime Minister Mateusz Morawiecki, following the announcement of a new economic package that includes plans for more progressive taxation.
The so-called “Polish Deal”, unveiled by the government at the weekend, includes bold spending promises on social benefits and infrastructure investment, as well as plans to lessen the tax burden on 18 million lower-paid Poles. Part of the costs will be covered by increased contributions from top earners and some businesses.
As he and government colleagues embark on a tour of Poland to explain the programme, Morawiecki – a former finance minister who before entering politics was an international banker – told Wprost that “we have to build a fair tax system”.
The current one is “unfair, and in some cases very unfair”, he argued, noting that some companies with a presence in Poland use “special legal schemes” to pay tax abroad, in countries such as Luxembourg, the Netherlands and Ireland.
“And yet all these rich people live somewhere – and they do not live in the Bahamas or Luxembourg, but in Poland,” said Morawiecki. “The rich use our roads, pavements, schools, health services…and often they do not contribute to it appropriately to their earnings.”
As such, “it is necessary to consistently create a more progressive system that works well in all civilised countries of the west”, argued the prime minister. Speaking separately to RMF, Morawiecki’s chief of staff, Michał Dworczyk, said that it was the government’s duty to “create a system that will provide equal opportunities”.
Morawiecki noted that tax hikes would mainly be shouldered by people with monthly earnings above several dozen thousand zloty. Development minister Jarosław Gowin has also admitted that higher earners will pay more tax.
Some experts have raised concern that businesses in Poland may flee higher taxes by relocating to the neighbouring Czech Republic, and data from Google show there has been a spike in searches for information on this.
But finance minister Tadeusz Kościński argues that such a move would “not bring benefits in terms of tax or contributions”, and could even work “to the contrary,” reports Bankier.pl, a financial news website.
The government’s planned tax overhaul includes an increase in the tax-free income allowance to 30,000 zloty (€6,624), up from the current threshold of 3,091 zloty (€683), for most taxpayers. The annual earnings threshold for entering the highest income tax bracket of 32% will also be raised to 120,000 zloty (€26,500).
Moreover, there are plans to exempt those with lower pensions from tax, which the government estimates will raise pay-outs for 65% of retirees.
These will, however, be offset by an increase in the social security and health insurance contributions of high earners, and especially the self-employed, whom the changes are expected to dissuade from sole proprietorship and push towards full employment contracts.
The government has also in recent years raised a number of smaller levies. A new tax on sugary and alcoholic drinks introduced this year has already brought in almost 300 million zloty (€66 million), reports Money.pl.
Main image credit: KPRM (public domain)
Maria Wilczek is deputy editor of Notes from Poland. She is a regular writer for The Times, The Economist and Al Jazeera English, and has also featured in Foreign Policy, Politico Europe, The Spectator and Gazeta Wyborcza.
