In addition to local governments and the middle class, small entrepreneurs will bear the largest part of the costs of the tax reform announced by the Ministry of Finance as part of the Polish Deal. Business associations are sounding the alarm and – as everything shows – they are right about this.
- According to Cezary Kaźmierczak from ZPP, the tax burden on small businesses and micro-entrepreneurs will increase by about 30 percent, which will mean the largest tax increase they have ever experienced
- According to economists, the reform is entirely politically motivated, and it will result in higher prices by small entrepreneurs, an increase in consumption and a decrease in savings.
- According to the ZPP, an alternative to drastic tax increases for small business may be the unification of VAT rates and the introduction of a minimum CIT rate of 1%. company revenues
- More such opinions can be found on the main page of Onet.pl
According to the announcements of the Ministry of Finance, the revolutionary changes in taxes, which are part of the Polish Order program, are to benefit a wide group of taxpayers, and they will be financed by the government and a small group of the highest earners. In practice, these assurances do not seem to have much to do with reality.
As we wrote on Tuesday, on the side of public finances, the costs will most probably not fall on the government, but on local governmentswhich will mean centralization of the state and will not be without impact on the quality of public services. Meanwhile, on the side of taxpayers, the group that will be hit most by the reform proposed by the government will be the middle class and small entrepreneurs.
ZPP: 30% tax increase for small entrepreneurs
According to the economists interviewed by Rzeczpospolita, there is one regularity in the draft prepared by the Ministry of Finance. Due to many seemingly minor changes, entrepreneurs will have to pay higher taxeseven though the rates themselves will not increase – the daily reported in the Wednesday edition.
Also on Wednesday Cezary Kaźmierczak from the Association of Entrepreneurs and Employers (ZPP) asked for small entrepreneurs. The president of the association admitted directly what an unpleasant surprise for entrepreneurs was what the Minister of Finance, Tadeusz Kościński, announced at the Monday conference.
– Earlier, in talks, the government proposed a tax cushion for the smallest business in the form of a registered lump sum, so that these 500,000 the smallest companies did not fall victim to the drastic tax increase. Now on Monday these companies were suddenly increased taxes by 30 percent. – noted Cezary Kaźmierczak at a conference organized by the ZPP.
Representatives of the association protest against the fact that the cost of the government’s social programs should be borne only by small Polish businesses – including owners of hairdressing salons, florists, beauticians and dressmakers – as well as the mainstay of middle-class specialists. The more that – as they declared – CIT does not de facto pay more than 60 percent. large companies. As they added, in reaction to the increase in taxes, petty entrepreneurs will be forced to raise pricesas a result, ultimately there will be far fewer beneficiaries of the reform than declared by the government.
– The story that 18 million taxpayers will benefit from it are fairy tales about the iron wolf – thundered Cezary Kaźmierczak.
Politically motivated reform, but small companies paid low taxes
Prof. Witold Orłowski from the consulting company PwC Polska. However, as the chief economic advisor at PwC Poland states, small businesses benefited from very low taxation in PolandMoreover, at this point it is still impossible to determine who and how much will lose from the changes proposed by the Ministry of Finance.
– I have no reasons to disagree with the ZPP’s calculations. The problem, however, is that until the reform becomes law, we will not have a precise basis for the calculations. There are reports of various planned reliefs, so at this point we do not know what the final shape of the changes will be, the economist emphasizes.
Meanwhile, according to Cezary Kaźmierczak, the entry into force “will deepen the romanization of the Polish economy”. What would that mean? It is about achieving dominance by large state-owned companies and foreign concerns, and the marginalization of Polish capital, which “will have no way to develop”. As the president of ZPP assessed in a tweet, we can stand on the threshold of “the highest ever tax increase for micro-companies”.
– I understand the arguments used by Cezary Kaźmierczak. If the rulers do not care about development, then of course they have the right to make such decisions. This is a politically motivated and not an economic exercise, but having a parliamentary majority, they can change the tax system – emphasized prof. Witold Orłowski.
The Economic Effects of Increasing Taxes on Small Businesses
What will be the economic consequences of changes in taxes? As in the part that will hit the revenues of local governments, it will include shifting the greater part of the costs onto the inhabitants and a decrease in the quality of the services provided, so in this case the effects will go far beyond the transfer of costs onto recipients mentioned by Cezary Kaźmierczak. According to prof. Witold Orłowski in the long term, the effect will be an increase in consumption at the expense of savings and investment.
– This will boost growth in the short term, but in the long term – precisely due to lower investments – the result may be the opposite. You have to take into account the acceleration of inflationand entrepreneurs will probably feel more unstable in the economic environment, the economist enumerated.
ZPP representatives admit that after the crisis related to the COVID-19 epidemic, efforts to increase tax revenues may be inevitable. However, in their opinion a fairer solution would be, on the one hand, the harmonization of VAT rates (while compensating the poorest), and on the other hand, the establishment of a minimum CIT tax rate in the amount of 1 percent. the revenues of the companies that fall under it.
– According to what we counted, this would give the state budget PLN 40 billion a year, i.e. a sum much higher than that which we can obtain by increasing the health premium for micro-entrepreneurs running hairdressing salons and paying a lump sum on recorded revenues – noted Jakub Bińkowski, member of the management board of ZPP.
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