Polish Coalition Disunited Over Tax Changes

by Ulrika Lomas, Tax-News.com, Brussels

23 November 2001

Polish President Aleksander Kwasniewski on Thursday signed into law government-proposed amendments to the personal income tax law, freezing existing tax thresholds for the next two years and introducing a 20% tax on savings income.

"The president made his decision after consulting lawyers and as quickly as was possible, due to the difficult economic situation," says a press release from the presidential chancellery.

The law was adopted by the Sejm, the lower house of parliament on 21 November. The government hopes it will bring additional budget revenue of 4.3bn zlotys ($1.05bn) next year.

This is just one element of the package of tax measures the government was hoping would pass quickly into law, and junior coalition partner Polish Peasant Party (PPP) has objected to some other elements of the package. Sejm Deputy Speaker Janusz Wojciechowski announced on Wednesday that the PPP will not agree to a planned rise in VAT the government sees as vital to reining in a ballooning budget deficit. The PPP will block this and any other change which, as he put it, will affect the poorest. Speaker Wojciechowski said on the Third Radio Programme that the PPP joined the coalition with conviction that VAT would not be raised and would continue to support this:

Instead of raising VAT, the PPP is in favour of a 5% tax on imports, which the government sees as negative in terms of Poland's EU accession process.

Meanwhile, the government approved the draft of an amendment to the health insurance law to set the insurance contribution at 7.75% of individual income for 2002, rising by 0.25% annually until it reaches 9% in 2006. The PPP may have something to say about this, of course.

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