Poland’s conservative-nationalist government has plans to increase health spending and reduce income taxes as part of a broader program aimed at strengthening the economy in the wake of the epidemic.
The so-called Polish deal, which would support tax cuts for domestic workers, pensioners and families, as well as for the lower and middle classes, will be widely seen as an attempt by the ruling Law and Justice Department (PIS) to legislate before the last parliamentary elections in 2023.
Poland, like most countries in the European Union, has been hit by the Kovid-19 epidemic, which has claimed more than 700,000 lives and plunged the economy into recession for the first time in three decades.
Prime Minister Matius Moraviecki said the Polish deal – which would be pressured by loans and grants from the European Union’s recovery fund – was an opportunity to fulfill Poles’ dream of communicating with rich Western European countries as well as expanding the country’s middle class.
“We have huge opportunities ahead of us,” he said. “[In the past] We always had to think about liberation from external oppression. Today, however, we can take care of the freedom to make decisions about the rules of social and economic development in our own sovereign Polish terms. “
As part of the changes announced Saturday, Pais and his two younger allies plan to increase spending on underdeveloped health systems, some of which have been plagued by epidemics, rising from 5 percent of GDP in 2020 to 7 percent by 2030.
The tariff system will also be renewed. The income-tax-free allowance will increase to 30,000 zlotys, and at the doorstep where poles start paying a 32% higher rate of tax, it will rise to 85,000 to 120,000 zlotys per year.
Mortgage rules will also be amended anew and guarantees will be provided to make it easier for young people to buy property, while the rules surrounding building permits will be relaxed. There will be more benefits for families with young children and pensioners, as well as PIS claiming that an investment program will create 500,000 new jobs.
Moravieki and his colleagues at the ruling camp’s congress gave a few details about paying for tax cuts.
Jaroslav Gavin, a deputy prime minister and head of the deal, one of the two junior coalition partners in the peace process, acknowledged that the richer Poles would have to pay more taxes, but did not elaborate. He added that the state budget would suffer.
Polish Finance Minister Tadius Koskinski told the FT that tax cuts would be partially financed by rapid increases. He added, however, that the fiscal deficit would also be partly covered by the provision of higher social security for workers and businesses, which would put more workers under pressure from self-employment to full employment contracts and the removal of a cap on social security payments for self-employment.
Koskinski said the state’s annual net expenditure on tax cuts would be about প্রায় 7 billion. He added that the change in taxes has resulted in a reduction in revenue and there will be a further 3 BN zloty in co-financing local governments.
Adam Jarniak, an economist at Politica Insight, said the government’s estimates of rapid growth in the cost of government plans are “optimistic, but I think they can be.”
However, he expressed concern that changes around housing – including state guarantees on home loans for young orrowers – could heat up a warm market.
“Guarantees of down payment are very risky at this time of the business cycle in the housing market,” he said.