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Business Leaders Criticize Government’s “Polish Deal” Tax Reform Program

By News Creatives Authors , in Leadership , at August 4, 2021

Nine of the largest Polish business associations, gathered under the umbrella of the Entrepreneurship Council, have issued a scathing assessment of the government’s “Polish Deal” tax reform program.

In a joint statement, they warned that the proposed changes risk “deepening the inconsistencies of the tax and social security system” and spurring the growth of an economic grey zone.

Instead of offering comprehensive and consistent rules, the stimulus plan is based on narrow, targeted interventions, largely reliant on a radical overhaul of the social security contributions system, the business leaders said. As a result, the package disrupts the stability and legal certainty of the existing tax system, negatively impacting companies’ long-term business plans.

The Council argued that there are “profound inconsistencies” between the government’s stated objectives and the choice of policies designed to achieve them.

On the one hand, the reforms are intended to provide a financial boost to the healthcare system from the current 4% of GDP to 7% by 2027 through the collection of higher social security contributions. On the other, they will encourage more business owners to switch to a lump-sum taxation system or to set up limited companies, which will lead to decreased contributions.

According to the signatories, the contradictory provisions of the “Polish Deal” will boost the economic grey zone by creating legal loopholes.

The business leaders also pointed out the government’s failure to consult business owners, and called on lawmakers to commission an expert analysis on the long-term impact of the proposed changes.

According to the government, the “Polish Deal” will lift the post-pandemic economy by lessening the tax burden on 18 million lower-paid Poles and increasing rates for top-earners.

A key element of the stimulus package is raising the tax-free income allowance to 30,000 zloty ($7,816), up from the current 8,000 zloty ($2,084).

The highest income tax bracket of 32% will be increased to 120,000 zloty ($31,266).

Under the proposed amendments, healthcare contributions of self-employed individuals will no longer be deductible for tax purposes. They now will be calculated proportionally to income at the rate of 9%.

Among other measures, the package also includes increased support for families with children, and a financial incentive for employees and entrepreneurs who have settled abroad to return to Poland.

If approved by the Parliament this fall, provisions of the program are expected to come into effect in January 2022.


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