Gwiazdowski column: VAT on respirators and Keynesian multiplier

There is a meme circulating on the internet with the image of John Keynes and the caption: “If I give you the 80 out of the 100 I took you, the economy will be spinning that ho, ho. I called it a multiplier. This roughly reflects the essence of the economic demand paradigm created by the author of Keynes. Taxes serve to implement it. To be able to give something to citizens, you must first take it away.

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But taking and giving costs a little, so give less than you took. Apparently, however, when the state takes more and gives less, this “multiplier” works.

It shows how much the dependent variable (for example, income) will increase as a result of an increase in the independent variable (for example, capital expenditure) by one unit. And it shows that if taxpayers spend their money on what they want, their future income will increase less than if the state spends at least some of what it takes from them.

However, it is not this multiplier that will be the subject, but taxes, thanks to which it is to show its beneficial power. Today, VAT.

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It turned out that the health minister paid a “proven” supplier (or so he called him in an official letter to another bidder) for undelivered respirators, not only for their strangely high price, but also for VAT. This “verified” supplier should pay this VAT to the tax office reporting to the minister of finance, that is a colleague from the minister of health’s government. But he missed – just as ventilators did not go to the minister of health.

After all, if a private citizen paid VAT in the same way to a “proven” supplier for anything, and this VAT would not reach the tax office, the office would come to this individual as part of the policy of “tightening” the system and eliminating the “VAT gap”.

Obviously, these provisions on joint and several liability of taxpayers with the “state ruled by law” have nothing to do with, but their constitutionality was confirmed by the Constitutional Tribunal, even before PiS attacked it. Nota bene, the principle of joint and several liability of taxpayers was introduced while PiS was still in opposition. But somehow he did not protest, hoping that one day he would be able to use these provisions. Anyway, today the opposition does not protest against the regulations aimed at taxpayers (but only against those against them). And I bet when she comes to power, she’ll use them.

Because the Republic of Poland is not such an ordinary “state of law”, but “democratic”, and in addition “implementing the principles of social justice”. So since “democratically” contrary to the principle of the “rule of law” regulations were passed and in addition they “implement the principle of social justice” understood (in accordance with the principle of historical interpretation of the law) as it was understood by the legislator when it was implemented in 1945 , the Ministry of Health should pay this VAT again. Dura lex, sed lex.

In my opinion, it makes no sense for the State Treasury (Minister of Health) to pay itself (the Ministry of Finance) any VAT at all. For a moment it seemed to me that the European Commission saw the absurdity of proposing the abolition of VAT on public procurement. But it turned out that it is not because it is absurd – similar to imposing income tax on social benefits – like pensions), but because it limits the budgets of Member States buying goods and services, and its elimination will help respond to the pandemic and strengthen EU!

This will allow the Commission and other EU agencies and bodies to import and purchase goods and services VAT-free when purchased products are distributed as part of an EU crisis response. And this justification is just absurd. After all, VAT paid by state institutions goes back to the state budget. It just goes around unnecessarily. And if one institution buys something without VAT, less VAT will go to the budget. And there will be less in the budget for investments and therefore the famous Keynes’ multiplier will be lower! Huh? (that’s sarcasm, of course).

But it is impossible not to notice (without sarcasm) that the budgets of European families are actually limited by VAT. So maybe we need to reduce it and thus help them “respond to the pandemic”? It turns out that this cannot be done. By … “multiplier”.

Yes, the state must have something to function for. And it needs taxes from citizens. But the tax system may be better or worse. Or hopelessly – as it is in the case of a democratic state ruled by law that implements the principles of social justice. You know it’s us! Only we have written it so beautifully in the constitution.

Robert Gwiazdowski

The author of the column expresses his own opinions.

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