Economic program presented by the biggest opposition party includes several ideas whose implementation would lead to higher public spending. Entrepreneurs are usually sceptical about such initiatives as they backfire on them in the long run. Detailed information on financing the program has not been given yet.
Demands for a rational economic policy, a new investment-friendly tax system, unlocking the development potential of SMEs and for introducing changes that would make doing business easier have been on the Employers of Poland agenda for a long time. Reindustrialisation is an idea endorsed on the European level as an answer to the current problems with economic growth.
However, most ideas contained in the program will not contribute to creating favourable conditions for economic growth. Those ideas include: additional tax levied on hypermarkets and banks, administrative measures aiming at increasing remuneration levels, reintroduction of the third personal income tax bracket. Here is our stand on selected aspects of the program:
The idea to increase remuneration levels through administrative measures, including regulations of the minimum wage is a cause for alarm. A situation when the government claims the right to exert pressure on remuneration levels in private enterprises may have negative effects on the conditions in which Polish enterprises function. One should bear in mind that an excessively high minimum wage is a heavy burden for SMEs.
Entrepreneurs welcome the idea of decreasing VAT rate to 22 per cent and cutting CIT rates for small and medium enterprises. However, we would like to point out that the proposed VAT rate of 22 per cent is taking effect at the beginning of 2017.
Scrapping National Health Fund
PiS has been promoting returning to budget-funded health care system for years. This is linked with the end of contracting health care services and with scrapping the National Health Fund. Such a change would be revolutionary (although PiS announced the changes would take place in an evolutionary manner). It would also mean returning to the mediocre system of the period before 1999.
Health care system grappling with the effects of population ageing and increasing costs of medical treatment (also linked with new technologies) has not gone off the rails only thanks to its insurance-based character. Introducing a budget-funded system could lead to an uncontrollable cost explosion and as a result to budget problems.
PIS announced plans to increase spending on health care until the average European level is reached and introduce a cap for medical treatment cost – a maximum total cost of medicines to be borne by a patient above which medicines are for free. These announcements sound appealing to citizens. Unfortunately the program does not specify the source of funding for those promises. This makes them seem difficult or even impossible to put into practice within a short (4-year) period.
Scrapping pension reform that increased pensionable age is from the economic point of view a completely unrealistic idea. Polish society is aging rapidly and our social security system based on solidarity between generations is under an increasing pressure. We already need to spend 40 billion PLN a year from the state budget to patch up gaps in the Social Insurance Fund budget.
Taxation of banks and large-scale retail stores
This solution based on Viktor Orban’s policy is quite a radical manifestation of economic nationalism, which does not contribute to economic growth and merely serves as a typical populist slogan. The economy cannot function properly without a well developed financial sector or retail and service industry.