According to Employers of Poland, the first 100 days of Prime Minister Szydło’s government were a time of intense work and opening many projects. The fact that the voice of social partners, employers and employees, is relatively often taken into consideration is a satisfying development. Plans of changes in the tax system, labour law and administration augur well. Employers of Poland have long called for a new tax law and Labour Code, appropriate for the foundations of present-day economy.
When reviewing the government’s actions in its first 100 days, Employers of Poland tried to present both assessments and recommendation. Each of the main areas of interest is discussed succinctly, with focus on the interest of Polish entrepreneurs, the drivers of Poland’s economic growth.
Labour law and social dialog
The draft of the regulation introducing the 12 PLN per hour minimum wage presented by the Ministry of Family, Labour and Social Policy requires modification, preferably on the forum of the Social Dialog Council. We fear that these changes will not solve the problems of abusing civil contracts or fictional self-employment, as well as the use of rates lower than the minimum wage. In fact, they may lead to an increase in the number of contacts of order and grey market growth. The consequences could be contrary to the lawmakers’ intentions. Moreover, the regulations included in the draft do not address the issue of contracts which are underway in public procurement and the need to renegotiate them and valorize the remuneration – which will have an impact on the labour market at large. We also object to interference with the freedom of contract and the specificity of the National Labour Inspectorate’s Competences. We see the introduction of an obligation to evidence working hours in writing as an act of creating further administrative barriers, violating the principle of deregulating the economy.
The government has met its promises and prepared an amendment to the Labour Code regarding the obligation to confirm the conditions of the contract in writing before the employee is allowed to work. Motivated by the need to restrict the phenomenon of the so-called “first daily wage syndrome”, we accepted the draft in the Social Dialog Council. However, due to the fact that employers have to adapt to changes and the fine sanction, together with other social partners we have suggested prolonging vacatio legis to 6 weeks. The government agreed, so the current version of the draft includes this solution.
We fully support the initiative of the Ministry of Family, Labour and Social Policy regarding the establishment of the Labour Law Codification Commission. The Labour Code currently in force was passed in 1974 and despite almost a hundred amendments it is not appropriate for current socioeconomic conditions. Therefore, rather than pass ad hoc amendments, it is better to start working on systemic changes. We are also of the opinion that apart from academics, the Commission should also include a representation of representative social partners. The New Labour Code cannot be elaborated without the cooperation and consent of employers and employees.
Our assessment of the government’s engagement in the Social Dialog Council is also positive. Dialog with employers’ organizations and trade unions is indispensable in elaborating solutions with a tangible positive impact on the Polish labour market. We are glad that the government is increasingly aware of this and hope that past problems with ignoring the Social Dialog Council in consultations will be avoided. Employers of Poland will also hold the government to account with regards to the realization of the act on the Social Dialog Council and other social dialog institutions from July 15th 2015.
Thus far, the steps taken by the Minister of Digitization and the plans she announced have to be assessed as satisfactory. We are moving towards a situation where the Minister is the main coordinator of the process of digitalizing administration and has a tangible impact on projects realized by ministries and central offices. The dispersion of competences prevalent in the previous institutional configuration resulted in the creation of systems and platforms with no interlinks whatsoever, presenting difficulties for cooperation and data exchange. There was no single e-administration, but rather many isolated isles of particular institutions.
Substantial changes are planned in the Digital Poland Operational Program, both when it comes to financing the development of the telecommunications infrastructure and improving the citizens’ digital skills. While we understand that presenting detailed plans in every problem area within 100 days is not possible, we would like to highlight the need for more specifics.
The mining industry
Continued problems of the bituminous coal mining sector are a cause of social unrest and put the future of this branch, fundamental for the Polish electrical energy industry, in doubt. Obviously, many years of negligence could not have been made up for in such a short time, but it is still disappointing to see the government fail to present any new propositions in this regard and effectively resort to repeating the plans of the previous government’s plans. It is also surprising that the old plan is not carried out, although every month of delay is causing losses of hundreds of millions – losses which at the end of the day will have to be covered by the taxpayers.
We have the right to demand that the government finally improves the condition of bituminous coal mining, so that a sector of key importance for Poland’s energetic and economic security finally starts functioning according to appropriate principles.
The government of PM Szydło has quickly secured funds for additional activities planned for this year, particularly for the Family 500+ program. This objective has been met thanks to amending the budget for last year, increasing the budget deficit and moving some of the income to 2016. Additional income has also been secured by the introduction of the bank tax, the rate of which has increased in the course of legislative procedures in the Sejm, although the initial estimations may only be confronted in reality in the coming months. In terms of expenses, relief is provided by delaying the implementation of the most costly elements of the winning party’s program. For example, the cost of the new child-rearing benefit in the first year has been cut from 23 bln PLN to a little over 17 bln PLN.
Therefore, the new government has risen to the most pressing challenges, but did so at the cost of stopping the process of fiscal consolidation and increasing tax burdens. The tax collection rates remain an unsolved problem, but will surely be addressed in the coming years. The cabinet will face increasing problems with maintaining the deficit of government and local government budgets below 3 percent of the GDP while at the same time increasing public expenses in order to implement changes announced in the expose. Thus, the assessment of the government’s management of public finances will depend mostly on the way it copes with constructing a realistic budget for 2017.
The financial sector
The government never denied that it wanted to introduce additional forms of taxation for financial institutions, particularly banks, in order to acquire funds to cover increased budgetary expenses. However, the form of the bank tax (although it involves other entities, including insurance companies) is far from optimal. Treating assets as the object of taxation discourages banks from providing credits, particularly those with a low marge, namely housing credits. As a consequence, access to financing for investment and consumption for both individual and corporate clients is restricted. The imoact of problems such as increased burdens for the banking sector resulting from the opening of the creditor support fund, payments to the Bank Guarantee Fund for compensating clients of bankrupt cooperative banks, increased capital buffers and loss absorption capacities in the case of significant deductions have been ignored.
The manner of communicating the government’s decisions pertaining to the financial market has also been inappropriate. Numerous times the final form of legislation was shaped in a public discussion between several decision centers. Too often, the signals on key issues, such as the size of the budget deficit, were conflicting. This lack of a cohesive message translated to apprehensiveness among investors and in turn to decreases and larger scope of fluctuations on the currency market and the Warsaw Stock Exchange. At the same time, we acknowledge that the communication of the government’s plans has improved somewhat in recent weeks.
Last December, following up on election promises, the act imposing taxation on some financial institutions was passed. As a consequence, banks and other financial institutions have to pay a tax rate of 0.44 percent of their assets per year.
The final shape of another new tax announced during the campaign, the retail sales tax, is a subject of heated debate. Entrepreneurs are concerned with the discrepancy between the lawmakers’ intentions and the potential impact of the regulations on those to whom they pertain. The objective is apparently to introduce more competitive equality between the biggest entities on the retail sales market and their smaller competitors and, at the same time, even out the negotiating positions of producers and retailers. We hope that the act will not result in an attempt to extend these regulations to the broadest possible group of entities.
The amendment of the anti-tax evasion clause has also caused controversy. While successful combat against tax evasion should be one of the priorities of relevant state administration organs, entrepreneurs’ fears of arbitrary and unjust application of the clause appear to be justified. Such an important draft should be very meticulously prepared. Previous drafts in this regard were plagued by many inconsistencies and ambiguities, leading to lawmakers deciding to stop the legislative process. Therefore, serious discussion is needed in order to ensure that the final shape of the regulation guarantees its efficiency and to avoid any negative impact on the business activities of law-abiding entrepreneurs.
Entrepreneurs are still waiting for the CIT for small companies to be lowered to 15 percent, the double investment deduction for those reinvesting their profits to be introduced and for an effective tax exemption system to be established. Facilitating the innovativeness and competitiveness of Polish entrepreneurs is undoubtedly the key to sustainable development. In order to do so, state support is needed and eagerly awaited by entrepreneurs.
Employers of Poland positively assess the proclamations of combat against low VAT collection rates, as the resulting losses of billions of złoty are a serious threat to our country’s economic condition. Thus far, the administration’s efforts were inept and ineffective. Moreover, in recent years many law-abiding entrepreneurs have suffered the consequences of the illegal actions of others – actions in which the former participated only unwittingly.
Therefore, effective instruments for combatting organized tax crime have to be introduced as soon as possible, for the good of entrepreneurship and with the citizens’ trust for the state in mind.
The first 100 days of the government were characterized by many announcements of changes in healthcare, big presence in industry conferences and an opening to other actors. Importantly, this time was used to conduct broad consultations and listen to the voices of many actors active in healthcare. Numerous times, the minister asked social partners for their suggestions and recommendations.
In this time, one draft was passed by the Council of Ministers (free medication for seniors aged 75+). More than ten working teams for elaborating industry recommendations in particular areas were established. This is an important initiative. However, the lack of social partners in these groups is a cause for concern. Thanks to the social partners’ efforts, the Tripartite Group for Healthcare has also resumed its activities. Upcoming meetings will be devoted to solving the problems of low wages among healthcare professionals. We hope that the openness to this initiative translates to a willingness to change the government’s stance, seeing that we have criticized the guidelines to the Medical Activity Act and pointed out that thorough changes are needed.
In the face of the low fertility rate, the aging of the population, negative migration balance and unfavourable demographic prognoses, we clearly need urgent solutions in the field of pro-family policy. State support within the Family 500+ program will surely be a significant burden for the budget. Social workers have voiced concern that granting support in monetary form restricts the chances for the funds to be distributed appropriately and makes effective control and prevention of abuses impossible. Such a financial instrument, while important, should be an element of a wider strategy for developing childcare institutions (daycare, kindergartens). Such efforts, as well as flexibility in employment and an appropriately high income tax threshold, are conducive to parents’, particularly mothers’, job activity. It is worth pointing out that in the next twenty years, Polish economy will experience such workforce shortages that they will not be covered even if the most optimistic migration prognoses prove true. Therefore, making good use of already available workforce is particularly important.
Employers of Poland