Polish government moves to simplify tax reform

Polish government moves to simplify tax reform

The Polish government approved a tax law amendment that would simplify Polish Deal tax reform, which has been in force only for four months, and has been criticised by the Polish government on Friday.

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. Entrepreneurs complained about increased burdens due to the fact that their obligatory contributions were raised from January.

The middle-class allowance was introduced in order to shield the middle class, but the solution was fraught with its own problems and was not clear to tax advisors and accountants.

The middle-class allowance was a poor idea and will 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're removing the rightly criticised middle-class allowance and we're lowering the PIT at the same time because it's the strongest reduction in years that will cover millions of taxpayers, Morawiecki said.

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

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

Morawiecki said changes to health insurance rules would be beneficial for some 1.4 million entrepreneurs.

The prime minister blamed Russia and its aggression on Ukraine for destabilising European economies because of 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 propose lower taxes, just taxes and simplified taxes, according to Morawiecki.

If Parliament didn't pass the legislation without delay, the new solutions could come into force from July.