Government to defend constitutionality of pension overhaul after public debate
November 4, 2013
The Polish government will present legal opinions to defend the constitutionality of its planned pension overhaul, recently under heavy fire, once the month-long social consultations on the bill are completed, a Finance Ministry official said in a twitter post.
"We will present such opinions at the end of the social consultations," deputy Finance Minister Izabela Leszczyna said adding that "the outcome of the consultations will certainly be seriously considered by the lower house."
The government's bill to overhaul the partially privatized segment of Poland's pension scheme has come under heavy fire in the first round of consultations since the draft bill was published in early October. At least two government institutions and the pension industry lobby have said the bill is outright unconstitutional.
Under terms of the bill, Polish open pension funds (OFE) will transfer 51.5% of their end-January 2014 AuM back to the state in the opening shot of a reform that will make participation in the partially privatized portion of the system optional and then bar the rump pension funds from invested in Treasury paper or Treasury-secured debt.
The proposed changes violate articles 21 and 64 of the Constitution, which guarantee the protection of property; thus, arousing serious legal doubts.
Elements of planned pension reform have also raised doubts of president's lawyers so the chancellery is gathering opinions of constitutional law experts on the matter, a person familiar with the issue told PAP Polish news agency.
"Constitutional law experts are wondering what the character of means gathered [in OFE] is in the context of the planned transfer of T-bonds from OFE portfolios to ZUS and then cancelling them," the person said. "It raises doubts of presidential lawyers."
The Presidential Chancellery is therefore "gathering opinions on whose the money collected in OFE is," the PAP source added.
Poland's Labor Minister, technically author to the bill, said Wednesday that his ministry was not in position of any legal opinions supporting the constitutionality of the bill. He said only that the Finance Ministry, whose concerns for the costs of the system inspired the overhaul, was confident of the constitutional grounds.
Finance Ministry chief economist Ludwik Kotecki told broadcaster TVN CNBC on Friday that the ministry sees pension system reform as constitutional and has expert opinions confirming that, but even if the reform fails to be implemented, the government will not resort to hiking VAT rates.
"Yes," Kotecki said when asked if the Finance Ministry had constitutional law expert opinions on constitutionality of the government-proposed bill. "And those expert opinions will be made public."
Poland will, however, refrain from hiking VAT tax rate if OFE bill is not signed to law, Kotecki said.
"We have no plans to raise VAT in place of that bill, should it fail to pass," Kotecki said of government's contingency plan, should the OFE bill fail to pass. "But I see no reason for it not to pass."