The Warsaw Voice » Business » Monthly - November 3, 2015
Business & Economy
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Promises, Promises
In the campaign ahead of the Oct. 25 parliamentary election, Polish political parties strove to outbid one another in promises designed to woo voters. Both the ruling coalition and opposition parties vowed to improve Poles’ standard of living if they came to power. Campaign promises included an increase in the minimum wage and an increase in the level of tax-free income. The opposition Law and Justice (PiS) party additionally promised to introduce a zl.500-a-month child allowance and lower the retirement age.

It is unrealistic to expect that politicians will deliver on all their promises—the public coffers would not withstand that. But even if some of the campaign promises are met the cost could be enormous. So it is essential to find sources of financing them as soon as possible.

According to what Law and Justice said during its election campaign, some extra funds could come from the imposition of a special tax on banks and from slapping a tax on hypermarkets. Bigger government revenue would also be generated by measures designed to increase tax collection efficiency and to tackle the off-the-books, tax-evading segment of the economy. This underground economy is a fact of life in most countries, and its impact is felt by both the state administration and businesses. The shadow economy means that the government does not get some of the taxes due to it, while entrepreneurs have to contend with unfair competition. Those working in this informal segment of the economy also lose out because such jobs do not guarantee basic benefits such as social security and health insurance.

International experience shows that although the shadow economy cannot be completely eliminated, it is possible to scale it back and thus significantly increase government revenue. A report by the Gdańsk Institute for Market Economics suggests that the shadow economy in Poland will be worth zl.372 billion this year. This means that it has expanded by zl.34 billion since 2011 and is equivalent to over 19 percent of the country’s GDP. So there’s a lot at stake.

People decide to work in the shadow economy mainly because of high and complicated taxes, excessive regulation, and regulations unfavorable to entrepreneurship. But the Gdańsk Institute for Market Economics says in its report that the “gray zone” can also have a positive impact on the economy. For example, it enables people with the lowest qualifications to earn an income, thus helping limit poverty and relieving the government of some of the burden of social welfare spending. What’s more, it is in the legitimate economy that these people spend the money that they earn under the table.
Andrzej Ratajczyk