Sunday, 3 January 2016

Marching towards common happiness

Those guessing I would be writing on personal life this time have been misled. I am launching a new tradition in which the first post in a month will be dedicated to attainments of PiS-government and their president (who officially is also the president of Poland). Since the blog is by no means objective, I will hold back from describing facts (assuming they are known, though all media, no matter if straightforwardly pro- or anti-PiS, seem to distort the reality to shape the communication to their audience) and focus on my observations instead.

Disclaimer: I am employed by a financial institution and hence my professional and financial well-being might be impacted by some of the events I comment on, especially by financial institutions tax.

PiS, in express-fast pace, have pushed their new constitutional tribunal law through both houses of parliament and their notary (Mr D.) signed the law without further ado, despite harsh condemnation from nearly all representatives of judiciary power and despite doubts whether the amendment was in breach of constitution. Brushing aside all the errors made by PO in June 2015 and the whole turmoil in late November 2015 around swearing in newly elected five tribunal judges, we need to see the end that justified the means. The tribunal, the strongest representative of judiciary power (legislative and executive already taken over by PiS) had to be pacified. The tribunal was not just a stronghold of elite which had ruled Poland over the last 25 years, it was a hindrance for the good change being brought about by PiS. This has been said by Mr Kaczyński. Whoever stands on their way to unfettered power will be wiped out. The notable style of manipulation is typical for PiS: sling mud at your enemy, make people believe your enemy embodies evil, to justify an impetuous crackdown on them.

The banking tax draft law has gone through both houses of parliament and now awaits the notary’s (my apologies to all notaries, you at least read documents before you sign them) signature. The banking tax (actually financial sector tax) will take effect on 1 February 2016 and will be equal to 0.44% of an institution’s asset, with allowance for assets up to 4 billion PLN and government securities. The tax should fetch proceeds of 4.4 billion PLN (wonder whether this calculation takes into account lower CIT inflows from banks and enterprises) to finance pro-family policies. Effects will be analysed here in a few months, let’s give them the chance. My only comment is that banks have worked hard for their miserable reputation, but the tax base the government has applied will bring more harm than good, since banks will have a disincentive to pump money into the economy, especially the asset base with the best credit profile (and running on the lowest margins) is likely to cease to grow. It is naïve to think banks will not pass the tax into customers (they are already doing so). To make the criticism constructive, it would be wiser to: (1) apply a higher CIT rate for financial institutions – let’s tax profits not assets, (2) curb numerous ways of transferring money into Polish institutions’ head offices (and thus decreasing pre-tax profits).

Similar is the status of the supermarket tax. The proponents have shifted from shop’s area to turnover as tax base, a move in a good direction. Critics of the new tax argue it will translate into higher prices. My view is a bit more sophisticated. It will be partly absorbed by retail chains, partly by customers, but those hit the most will be suppliers (small entrepreneurs), already now exploited by their off-takers having incomparably higher bargaining power. Dear small entrepreneurs who deliver goods to powerful retail chains, prepare for even lower margins and even more stretched out payment terms.

The media law, bringing public radio and television to the heel, is also likely to take effect before long. Public media, bastion of anti-PiS journalists, overly supportive to PO and Nowoczesna, will soon be brought into “balance” by nominees of the ruling party. The goal is to restore the balance in the public media. Still too early too assess the outcome of the new law. Let’s wait a few months to behold the cure!

The government is working to undo the reform pushing six-year-old children to start education. Finally, the defenders of the nation’s offspring will disallow the evil people to take away a year of childhood. Does not matter demographics is relentless, does not matter in most European countries children start schooling at the age of six (are Polish children intellectually inferior to them?). Most parents are happy. Instead, work should be done to make schools more friendly to six-year-old children, since teaching methods should be adjusted to the age of pupils.

The flagship project of the government, 500+ child allowance programme is in consultancy phase and likely to kick off in 2Q2016. The later the scheme comes into force, the bigger the relief to the public finances, so I hope its introduction is deferred by a few months more. Had the draft been ready as Mrs Szydło claimed during the campaign, while she waved a pile of documents subsequently shown to nobody, the progress of the scheme introduction would have been better. It needs to be noted, if PiS went back on its main promise, many of the voters, bribed by the 500 PLN monthly per child, supported PiS and secured outright majority in the parliament for the party. Once they turn their back on PiS, the party will be in a fix. By the way, if somebody offered me a job change in return for 500 PLN or 1,000 PLN monthly pay rise, I would laugh off and reject the proposal!

One thing that cannot be denied to the new deputies is that they work as arduously as no other parliament before. One thing I have learnt over five years spent in the corporate world is that while you work furiously fast (I have experienced it many times), the risk of making mistakes rises greatly. However, with all safety valves (independent president, independent judiciary power) disconnected, no stumbling blocks lie on the path towards lifting Poland from ruins into which it slid, run by PO-PSL government and president Komorowski.

On 22 October 2015, Mr Kaczynski said: To musi być czas pracy ludzi władzy. Polska niech się bawi, ale władza musi pracować. We must not forget those words. Prezes told us between the lines to have fun, mind our own businesses and let them take care of the country. The message is not to interfere, while they are doing their vicious job. Much of nation have turned out to be disobedient. Thousands of people taking to the streets to defend democracy are now displaying their strength and representing millions disgruntled with PiS machinations, but how long before they run out of steam? Meanwhile millions of other people are enjoying what they had been waiting up for – PiS bringing Poland into order. Waiting for the good change to come.

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