No revolution in taxation in Poland?

Surprising news came this week from the Polish government. The Economic Committee of the Council of Ministers announced it will no longer continue work on the conception of a single, unified tax. The Chair of the Committee, Deputy Prime Minister Morawiecki stated that the solution will not be implemented into the Polish taxation system.

The “unified tax” was to simplify the tremendously abundant tax regulations in Poland. The idea was to replace several fiscal obligations paid by Polish employers and employees by one tax that would be easier and simpler to calculate. As a result, Polish entrepreneurs would spend less time doing payroll calculations. Today, an employer not only has to calculate and settle due income tax, but also several contributions owed to Social Insurance Institution (ZUS), such as health and pension payments that finance public healthcare and retirement benefits.

After the introduction of the “single tax”, the costs involved in calculating and processing tax payments, especially those covered by public institutions, would in effect go down. On the negative note, taxpayers would have to say goodbye to the linear 19% personal income tax rate. The opponents of the concept of the new tax obligation highlighted the fact that the changes may result in increasing tax burden of business owners and people with salaries higher than average. Some tax advisors expressed the view that the reform is hasty and not thought through.

The government started working on the new tax in October. Apparently, the simulations and research done by state experts showed such reform would bring more harm than good. “Tax system should not be changed with a jackhammer” – said Minister Morawiecki. The head of the Ministry of Finance defined himself as a proponent of gradual alterations to Polish taxation system.

It is not clear whether this is the definite end of tax revolution in Poland or maybe government experts will suggest some other amendments to tax regulations.