[STANCE] Tax-free amount should be higher

Doceniasz tę treść?

“Raising the tax-free amount to 60,000 zlotys is a concrete measure that we will carry out in the first 100 days of government,” he said. – was announced by representatives of the Coalition government on October 15 in the election campaign. Unfortunately, the government is delaying this promise, most likely out of concern for the condition of the budget. – This is a fundamentally flawed decision that undermines the ruling coalition’s credibility and misreads the relief’s potential effects, the Warsaw Enterprise Institute notes. In the long run, the money that will remain in Poles’ pockets means more money for savings and consumption, and for the state, it means more investment and more robust economic growth.

During last year’s election campaign, many promises were made by politicians to repair the Polish economy and increase the wealth of society. The 100 concrete measures the Civic Coalition pledged to implement in its first 100 days in government included raising the tax-free amount to PLN 60,000. Now that the dust has settled after the autumn election campaign, the government is delaying the implementation of perhaps the most anticipated reform.

For years, the Warsaw Enterprise Institute has been calling for an increase in the tax-free amount as one of the conditions for faster growth and prosperity and for the Polish economy to come closer to the wealthiest countries in Europe. We welcomed the new coalition’s declaration with hope. The first effect of increasing net wages would be mitigating inflation’s effects without creating unknown inflationary risks. Higher disposable income for Poles would fuel consumption, strengthen trade, and allow savings to increase, which would consequently improve our banking system and trigger a more excellent supply of investment credit.

The higher tax-free amount is also an important signal and relief for employers. Labor shortages and high inflation are forcing a continuous increase in labor costs and, thus, a decrease in the competitiveness of Polish companies—both those focused on exports and the domestic market. Already today, we have industries that operate on the brink of profitability. This is felt most strongly in the catering industry, which has experienced the highest percentage of bankruptcies in years. The cost of doing business is rising; companies need to maintain margins and become more competitive. Increasing the tax-free amount means more income in employees’ pockets, so there is less pressure for wage increases and, as a result, more capital companies can allocate to further investments.

WEI shows the lie of experts who claim that increasing the free amount will increase inflation. Inflation is an increase in the overall price level in the economy, resulting in the long term from the fact that the supply of money exceeds the demand for money. The money supply in the economy is regulated by interest rate policy, which is carried out by the central bank and affects the economy as a whole. Raising the tax-free amount will not introduce additional money supply into the economy. Still, it will only shift it from the sphere of public spending to the realm of private expenditure, provided, of course, that the government simultaneously abandons some of the current state spending, especially in the social sphere, as well as the introduction of programs artificially, i.e., without the backing of savings, stimulating the credit market, such as through the 0% Credit program.

By increasing the tax-free amount, we are improving citizens’ welfare, which is undoubtedly a step in the right direction, but it is only the beginning. Today, Poland ranks penultimate in the OECD regarding the friendliness of its tax system. The Warsaw Enterprise Institute’s stance is that an in-depth reform of the tax system is needed today by introducing a corporate income tax in place of CIT and replacing personal income tax with a payroll fund tax. Presenting a unified tax on the payroll fund will allow employees to earn significantly higher wages while maintaining the exact cost of hiring an employee on the employer’s side.

Raising the tax-free amount sets the right direction for further reforms, so the government should not delay implementation and take its election campaign promises seriously.

Inne wpisy tego autora