Poland's New Coalition Agrees 2002 Budget Guidelines

by Ulrika Lomas, Tax-News.com, Brussels

05 October 2001

Discussions on next year's budget in Poland are proceeding hand-in-hand with formation of a governing coalition between the Democratic Left Alliance (SLD) and the Polish Peasant Party (PSL). These were the parties that made up the governing coalition from 1993 to 1997, so it's second time around - but the road to the altar has still been quite rocky.

Professor Marek Belka of the SLD said yesterday that during the talks on the budget and the coalition, proposals had been agreed to introduce a tax on interest on deposits and bonds and to include it in personal income tax. Also agreed was that the budget deficit should not exceed 40bn zlotys ($9.54bn), and that spending should be capped at 183 bn zlotys. 'Setting the maximum limit for next year's spending gives, at last, a basis for forming a very ambitious and difficult, but the only possible, economic programme,' said Belka, 'This is a crucial decision for me.'

Following the discussions Belka said he would be prepared to join the coalition as Finance Minister, although he said that there were still some disagreements over the question of an import tax.

The SLD's Marek Borowski said after the meeting that the PSL had insisted on introducing the import tax, which has been pencilled in at 5%, and the SLD was "not excluding" the idea, although it had initially preferred a rise in the rate of VAT as a way of raising more money.

One of the problems with the import tax is that it is likely to be very unpopular in Brussels, and won't help Poland's accession negotiations to the EU. Professor Belka however says that discussions are already underway with the EU and the WTO on the subject and are tending in a positive direction. A final meeting between the two parties will take place today at which remaining issues are expected to be resolved.

Asked about a capital gains tax, Professor Belka said he was not considering taxing capital gains at this time. Such a tax had been imposed from 1993 to 1997, but the government of the time removed it after it had a bad effect on the level of stock exchange transactions. 'We want to cover profits from stock exchange transactions with this tax but we have to prepare brokerage houses first. This is a tax which is waiting to be introduced, but as the last one,' Belka said.

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