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The Polish Conservative-nationalist government has outlined plans to increase health spending and reduce income tax as part of a comprehensive program designed to strengthen the economy after the pandemic.
The so-called Polish Agreement, which will provide support to home buyers, pensioners and families, as well as tax cuts for minors and middle-aged people, is considered by the Law and Justice Party (PiS) party as an effort to determine its purpose. stop before the parliamentary elections in 2023 at the latest.
Like most EU countries, Poland has been destroyed by Covid-19, the pandemic that has claimed more than 70,000 lives and pushed the economy into recession for the first time in three decades.
Prime Minister Mateusz Morawiecki said the Polish agreement – which will be backed by loans and grants from the EU recovery fund – was an opportunity for Poles to fulfill their dreams of capturing richer western European countries, as well as expanding the country’s middle class. .
“We have a tremendous opportunity ahead of us,” he said. “[In the past] we have always had to worry about the freedom of external oppression. But today we can take care of the freedom to decide the rules of social and economic growth in our sovereign conditions in Poland. ”
As part of the changes announced on Saturday, PiS and its two small allies plan to boost spending on the underfunded health care system, some of which has been flooded by a pandemic, ranging from 5% to 7% of GDP in 2020. 2030.
The tax system will also be rejected. The non-income allowance will rise to 30,000 zlotys, and the threshold for Poles to start paying the highest 32 per cent tax will rise from 85,000 to 120,000 zlotys a year.
Mortgage rules will also be renewed and guarantees will be provided to make it easier for young people to buy a home, while building permit rules will be relaxed. There will also be more benefits for families with small children and pensioners, as well as an investment program that claimed PiS would create 500,000 new jobs.
Morawiecki and his members of the government camp congress provided little details about the financing of the tax cuts.
Jaroslaw Gowin, the deputy prime minister and head of the deal, one of PiS’s two junior coalition partners, agreed that wealthier Poles would have to pay more in taxes, but did not go into details. He also said the state budget will be successful.
Polish Finance Minister Tadeusz Koscinski has told the FT that tax cuts will be financed in part by faster growth. However, he added that the fiscal shortfall will also be covered by higher social security payments for workers and companies as a result of changes that would push more workers from being self-employed to full employment contracts and remove the social security limit. payments for the self-employed.
Koscinski said the net annual cost to the state budget of tax cuts would be about 7 billion zlotys. He added that local governments that have lost revenue as a result of tax changes will have another 3,000 million zlotys in investment co-financing subsidies.
Adam Czernia, an economist at Polityka Insight, said the government’s intentions are “optimistic, but I think they can happen.”
However, he expressed concern that changes in housing (including state guarantees on home loans for young people) could cause a warming in the rising market.
“Payment guarantees are very dangerous at this time of the housing market business cycle,” he said.
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