Poland – Being a sort of Polish-style New Deal, the “Polish Order” (Polski Ład) programme includes a tax reform component that, with its entry into force on 1 January, has become a cause for confusion and discontent. Many imperfections and errors require immediate correction, but some important adjustments will not be possible until 2023. Moreover, even those categories of taxpayers who were supposed to benefit from this major tax reform, introduced by the Morawiecki government with only a few months’ notice, and even less if one takes into account the latest changes made at the end of the year, are seeing their gains evaporate because of an annual inflation rate of 8.6%, according to estimates by the Polish statistical office (GUS) for December. Thus, what was conceived as a blitzkrieg that was to ensure Jarosław Kaczyński’s Law and Justice (PiS) party another electoral victory in 2023 – or earlier in the event of early elections, as PiS enjoys a fragile majority in the Sejm – has already turned into a war of attrition, in the words of a Polish political scientist.
Many public sector workers and pensioners who were supposed to benefit from the January increase in the tax-free income threshold to 30,000 zlotys (about €6,600) regardless of one’s total income, compared with 1,360 zlotys (but only for low-income earners) in 2021, have had their net pay reduced in January because of calculation or interpretation errors by accountants (Polish income tax being withheld at source), because they had not submitted a declaration as they should have after the reform, or conversely because they had previously submitted a declaration that was no longer needed in their case.
On 7 January, Prime Minister Mateusz Morawiecki apologised to Poles and promised that the errors would be quickly corrected so that the unduly withheld sums would be paid out before February. And he took the opportunity to defend his new flagship reform. “We want all Poles to earn a better living. But above all, it is those who have been neglected so far who must earn more. After all, that’s what progressive taxation is all about”, said Morawiecki, who has criticised the previous system for benefiting the richest and disadvantaging the poorest, the latter being taxed more heavily as a percentage of their income when all taxes and social contributions are taken into account.
Government members and spokespersons insist, as Family Minister Marlena Maląg did again just recently, that “the tax measures brought about by the Polish Order programme are intended to help Polish families live better” and that people earning less than 12,800 zlotys a month (approx. €2,800) will not lose out, while those earning up to 5,700 zlotys (approx. €1,200) will benefit from the reform. However, they do not mention the more than 2.5 million self-employed Poles who, for the most part, are going to lose out under the latest PiS reform. This is mainly because, instead of paying a fixed amount for compulsory health insurance, which until 2021 was for the most part deductible from the income tax base, they will now have to pay 9% of their income for this contribution, which is now non-deductible from the income tax base, and gives access to the free care offered by a very poor public health system.
