Warsaw will lose billions in revenue due to government’s tax overhaul, says mayor

Warsaw will lose 3.5 billion zloty (€754 million) in revenue over two fiscal years in 2022-23 due to a recent overhaul of the tax system introduced by the government, says the capital’s mayor, Rafał Trzaskowski, who is a leading opposition figure.

Given that his city is also facing greater financial burdens due to the pandemic and the recent influx of refugees, Warsaw is “threatened with catastrophe”, warns Trzaskowski. A deputy finance minister says that the government is “listening carefully” to local authorities and ready to discuss the issue with them.

“The budget situation for this year is off to a bad start,” said the mayor at a press conference, quoted by the Gazeta Wyborcza daily. “And I am not even touching the issue of massive inflation and the huge effort involved in trying to integrate Ukrainian refugees, for which money needs to be found.”

The mayor was referring to a set of tax reforms introduced this year that create a more progressive system, in part by cutting personal income tax (PIT) on lower earners, which is one of the major sources of financing for local authorities.

“We can already see that PIT revenues in February were 11% lower than a year ago while the state budget gained 31%,” said Trzaskowski, quoted by Interia.

While a rise in the income-tax-free allowance to 30,000 zloty introduced in January has already made a dent in local governments’ finances, Trzaskowski said that a cut in personal income tax from 17% to 12%, announced last month, will further reduce the capital’s revenue by nearly 1 billion zloty a year.

“The 2022/2023 budget situation and another tax cut promises to be disastrous for the city’s budget,” said Trzaskowski, adding that at the same time “the government is shifting more responsibilities” to the local authorities, “starting with the pandemic” and now managing the unprecedented influx of refugees from Ukraine.

In the seven weeks since Russia’s invasion the city of Warsaw has spent 55 million zloty (€11.8 million) on helping refugees from Ukraine but has so far received less than 8 million zloty (€1.7 million) to help cover the costs, according to the mayor.

This year’s tax overhaul was introduced as part of the government’s flagship “Polish Deal” package. The changes were heavily criticised by opposition politicians and many experts as being hastily prepared and full of errors.

Initially, the government dismissed the criticism but subsequently admitted to certain problems and moved to fix them. The latest corrections, which allow business owners to change a form of taxation during this fiscal year, were made public on Wednesday.

The same day, deputy finance minister Artur Soboń said that the government is “listening carefully” to local authorities and is “ready to talk about systemic solutions related to the[ir] participation in taxes, including income taxes”, though declined to provide any further details, reports the Polish Press Agency (PAP).

Main image credit: Adam Stepien / Agencja Wyborcza.pl

Alicja Ptak

Alicja Ptak is senior editor at Notes from Poland and a multimedia journalist. She previously worked for Reuters.