Two months
I uncompromisingly dissected the economic agenda of PiS (or rather a string of
joyous give-away proposals) laid out to lure benighted voters. Campaigners of
PO, slowly bracing for retracting into new role of being the opposition, had
done little to challenge the puffed up expenditure assurances made by their
competitors and their efforts had boiled down to a simple message that if the
promises were kept, Poland would follow the traces of Greece. Until now…
On Friday
rumours that PO would unveil its revolutionary economic agenda leaked out.
Somebody had not managed to keep their mouth shut until Saturday and highlights
of PO’s new agenda came to the light one day earlier. Scrapping social security
and health service contribution and shifting towards funding the two systems
from the state budget looked appealing, since such modifications would simply
workings of the state administration, however raised doubts right away –
whether the changes would fall into line with constitution and how they would
be financed?
Yesterday I
was all day out, hence had no chance to listen to speeches during PO’s
convention, however what could be put together from the media coverage of the
event and what can be found in the underlying official agenda document, do not
square. And does not hold water.
I thought
PO, despite its numerous drawbacks, slip-ups, and general fatigue, would at
least not stoop so low to join senseless bidding in terms of economic promises.
I should have expected to have been wrong, yet another letdown aches. The
other, par for the course anyway, was that after reading the agenda released
yesterday, I can only concur with Mr Kukiz, who incidentally refused to present
any agenda of his grouping and claimed all agendas are a sh*t. Cross my heart,
I find no more suitable word to describe the essence of PO’s agenda.
I am not an
expert in education, health service, defence, security, foreign policy, but if
there is an area of my expertise, it definitely is economy. Under microscope
then goes the part of PO’s agenda dedicated to economic stuff.
First
nuance which should grab attention of a careful reader is that the agenda is
full of target solutions, not changes that are about to come into effect in
2016 or 2017, but when circumstances permit. On one hand the approach looks
wise, since legislation passed in haste or reforms pursued when the government
cannot afford to pursue them, would do more harm than good, while on the other,
the “conditional promises” are the easiest to go back on.
The first
pledge of PO is to crack down on “junk contracts”. Revisions to the labour law
include obligation for employers to withhold social security contributions,
minimum hourly wage of 12 PLN for junk contracts (only?) and introduction,
within a few years, of an “uniform job contract”, a legal agreement having
features of regular job contracts, to be applied whenever the bond between
employer and employee appears long-lasting. Poland has a problem with abusing
junk contracts. Employers save on labour costs (which are not exorbitant in
comparison to Western Europe), while employees are deprived of basic security.
For the government junk contract decrease proceeds from payroll-related
contributions, causing shortages of money in social security and healthcare
systems. Yet one needs to keep in mind junk contracts add flexibility to the
labour market, beneficial for students, or people taking up a second job and
these benefits need to be retained. A missing piece is the proposal to instate
regular taxation to taxpayers actually employed by corporations, but
theoretically employed as contractors. These are senior managers who are not
entrepreneurs and do not risk their own money in business and thus should not
be entitled to pay 19% corporate income tax, instead of 32% personal income
marginal tax! I cannot quote the source at the moment, but I recall the data
showing 2% of the richest PIT taxpayers accounted for 26% PIT proceeds. If
senior managers / executives (whose annual pre-tax earnings are between PLN
300,000 and PLN 1,000,000) were taxed like ordinary employees, this would bring
substantial inflows to the government and help decrease budget deficit!
The second
proposal echoing in the media is the alleged introduction of 10% PIT rate and
scrapping social security (ZUS) and health service (NFZ) contributions. I do
not know what was declared by PO leaders in their yesterday’s speeches, but
according to the agenda: (1) 10% will be the effective (not statutory) tax rate
for the poorest families, (2) the solutions put forward are long-term targets.
There has
been a lot of confusion about these proposal. For the first time in my life I
heard of “uniform” tax, which unlike journalists have interpreted it, is not a
flat tax, but presumably one tax which replaces regular income tax and other
tax-like contributions. PO most probably suggests progressive taxation with
pro-family allowances or deductions with tax rates not specified at this stage.
What is however more disturbing is that in return for scrapping ZUS and NFZ
contributions, income taxes would need to be increased.
The rest of
the chapter on economic agenda is full of general, hackneyed proposals. I could
comment on any of them with little hope anyone would take the trouble to read
the whole post from cover to cover, but will confine to a few main conclusions:
(1) I could
write such agenda as well. You could hire a bright 20-year-old student who will
list and elaborate on everlasting modest proposals, such as: decreasing
unemployment, reducing taxes, simplifying tax systems, improving tax
collection, cutting down on red tape, boosting exports, supporting innovations,
fostering investments, effectively using EU funds, building new roads, and go
on and on…
(2) Most
proposals are very general and lack specific solutions. For instance the
sentence: “we will help mortgage borrowers who struggle to service their debt
in a manner which will ensure equitable treatment of debtors repaying mortgage
in Polish zloty and in foreign currencies and will not put at peril stability
of the banking system” is not only too long, but also does not specify measures
the government would use to achieve the goal, as well as the cost for the
taxpayer. Lack of precision is the key drawback not only of political agendas,
but is the broader problem of the whole politics in Poland – just bring to mind
how questions in the bygone referendum or the one proposed by president Duda
(especially the one asking about decreasing retirement age) were formulated…
(3) Some
proposals include the total cost of the proposed solution, but the readers get
only the final number, not how it was arrived at. I realise few people read
agenda, even fewer would read attachments with calculations and assumptions,
even fewer would be able to verify their reliability, but for the sake of
transparency and credibility, would it hurt to back the final figures with
calculations.
While I
watch the drowning man (PO) desperately trying the catch the straw (regain its
disgruntled electorate), I am being put off tactical voting (as many people I
am weary of the current government, yet wary of PiS wacky government) but lean
towards voting for… Nowoczesna.pl. When the association was established in May
2015, I was sceptical towards the grouping and its founder. Mr Petru is more a
celebrity and representative of “survival of the fittest” approach to economy,
than an economist, leaders of Nowoczesna.pl often represent the cruellest face
of corporate capitalism, not something I hold dear, yet something I live off.
If there is grouping that would best represent my vested interests and future
financial well-being, it appears to be, oddly enough Nowoczesna.pl. Yet by no
means should such party head the government. It could only tip the scales in
decision-making as coalitional partner of a less economically liberal party. I
may wish Nowoczesna.pl enters parliament, but it should have a tiny tally of
seats there, simply because it does not represent ordinary people, whose, not
mine, well-being should be primarily fostered!
3 comments:
Today's MetroCafe.pl has a lovely cartoon summing up all this madness - it is of a party convention. From the top table we hear:
"We will abolish ZUS, NFZ and junk contracts."
"We will lover VAT and raise the income tax threshold"
"We will reduce the number of bureaucrats by half"
"Only for God's sake don't vote for all those populists!"
Point to bear in mind is this. PO might be clutching at straws, but given the latest clutch of poll results, it may still be able to form a coalition government with United Left (Zlew) and Petru's .nowocześni (who's overtaken Kukiz). PiS will likely end up the largest grouping in the new Sejm, but it's only possible coalition partners are the failing and the flailing - Kukiz and PSL.
I'll be voting for Petru.
The scenario in which PiS wins the election, but does not gain the simple majority is apparently the most plausible. I would bet it would scoop 40% (as PO did in 2011) of votes and would need to search for coalitional partner, while there's none on the horizon after Kukiz's movement fell into pieces. The broad coalition of other parties - PO, Zlew, PSL and Nowoczesna.pl seems exotic - in social issues there is room for compromise, but try reconciling economic agendas of SLD and Nowoczesna.pl.
Petru is also a populist, liberal, yet populist and in the long-run harmful, since if his agenda was pursued, hoardes of not the fittest and not the most resourceful disgruntled voters, would bring into power populists, more dangerous than current ones. Plus I cannot forget (and will not forgive unless he takes back his words) how fiercely he stood up for OFE. This will be a bitter pill to swallow... And a risk of a wasted vote, since Nowoczesna.pl balances on the edge of 5% threshold securing seats in the lower house.
Generally, you must keep your records that support an item of income, deduction or credit shown on your tax return until the period of limitations for that tax return runs out.
how can I protect my assets
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