Polish government proposes tax reform amendment

The Polish government approved a tax law amendment that would simplify Polish Deal tax reform, which has been in force for only four months, despite the fact it has been in force for only four months.

The Polish Deal increased the tax-free allowance tenfold, but removed the possibility of deducting healthcare insurance premiums from taxes, leaving middle and high-income earners poorer, while low-earners gained on the changes. As their obligatory contributions were raised from January, entrepreneurs complained about increased burdens.

The middle-class allowance was introduced by the government to protect the middle class, but the solution was fraught with its own problems and was unclear to tax advisors and accountants.

The middle-class allowance was a poor idea and would be scrapped, according to the prime minister, Mateusz Morawiecki. He said that the basic rate of the personal income tax PIT will be lowered to 12 percent from 17 percent.

We removing the rightly criticised middle-class allowance and we're lowering PIT and it's the strongest reduction in years that will cover millions of taxpayers, Morawiecki said.

Some 13 million taxpayers would benefit from the changes, while the rest would be unaffected, said Artur Sobon, a finance minister who prepared the latest amendment to the tax reform.

After its introduction, about 15 million Polish taxpayers won't be paying PIT, Sobon said, adding that the cut will cost the state budget 30 percent of its current income tax revenue.

Some 1.4 million entrepreneurs will be benefitted by changes to health insurance rules, according to Morawiecki.

The prime minister blamed Russia and its aggression on Ukraine for the destabilising of the European economies, despite the rapid rise in Poland, with inflation reaching 11 percent in March.

In order to compensate for the deficit in people's PAP wallets caused by high prices - and these high prices are a result of price manipulations by Russian gas giant PAP Gazprom and the war in Ukraine - we're proposing lower taxes, just taxes and simplified taxes, according to Morawiecki.

If parliament fails to pass the legislation, the new solutions could come into force from July, according to Sobon.