AWS, UW fail to agree on taxes, plan to try talking again this week
The two parties, which have been at loggerheads over a flat tax proposal presented by UW chief and Finance Minister Leszek Balcerowicz are scheduled to meet again this Wednesday to try and hammer out their differences.
The main bone of contention between the government partners is the fact that Balcerowicz's plan would eliminate almost all tax deductions. AWS wants to retain deductions for families, which it said are a key part of its pro-family agenda.
Balcerowicz's proposal calls for a flat personal tax rate of 22% starting in the year 2000 and a reduction of the corporate tax rate to 22% by 2002.
Despite the differences between the parties, Piotr Zak, the AWS parliamentary club spokesman, said late last week that his party believes the two approaches can be combined. He added that the two parties should be able to combine concepts such as tax simplification and joint tax returns for spouses. "We are open to discussion, but concessions that can be made are limited by common sense," he said.
Any agreement the two sides reach could founder, though, on the two parties timing requirements for introducing changes to the tax code. Balcerowicz is pressing for the government to immediately submit legislation to the Sejm so that far-reaching changes could take effect next year. Zak said that AWS feels such quick changes are unrealistic and favors a more gradual approach.
"A taxpayer should not be taken by surprise," he said. "If the deductions are to be eliminated, it can't be announced in September when people have already planned their housing investments."
Zak added that talks between the coalition partners could take weeks. "With Sept. 20 as a deadline (as suggested by Balcerowicz) for the government's proposal of tax changes, it will have no chance of being accepted by the Sejm," he said. "Let's make real politics."
The UW has viewed these calls for caution as a stall tactic, however, and although AWS has its doubts about Balcerowicz's radical reform plan, more and more business groups have joined in calls for adoption of the tax package.
Members of the Tax Coalition, a grouping of think tanks and business associations, were joined last week by the American Chamber of Commerce in Poland and the Foreign Investors Chamber of Industry and Commerce in strongly endorsing the goals in the "White Book of Taxes."
The groups argued that Poland has a unique opportunity to reform its tax system while it has a growing and sound economy.
"This innovative approach will attract foreign investment," David Bailey, president of International Paper Poland said at a meeting organized by AmCham to support the plan. "These investments are critical for creating new jobs, so the project deserves a full debate on its merits."
Leslaw A. Paga, chairman and managing partner at Deloitte & Touche, said that the tax system is an important factor taken into account by foreign investors considering Poland. But he added that calls by investors in support of the reform are not likely to have much influence on politicians. "They think in terms of their electorate's expectations," said Paga, a long-time Solidarity insider and the first Securities Commission chairman. "It is just a question of political bargaining."
And on the political end, the lobbying is not strong enough to push the tax reform plan through, he said. "I fear that the final decision will be delayed," Paga said. "There will be much talk that it is a great idea, but finally it will die."
Zak echoed this realpolitik view, saying that support from such business groups, especially foreign ones, should not be over-estimated.
"A regular taxpayer in Poland does not care whether Americans support the tax reform proposed by Balcerowicz," he said. "We have to plan our moves in line with the political reality in the Sejm."
The main bone of contention between the government partners is the fact that Balcerowicz's plan would eliminate almost all tax deductions. AWS wants to retain deductions for families, which it said are a key part of its pro-family agenda.
Balcerowicz's proposal calls for a flat personal tax rate of 22% starting in the year 2000 and a reduction of the corporate tax rate to 22% by 2002.
Despite the differences between the parties, Piotr Zak, the AWS parliamentary club spokesman, said late last week that his party believes the two approaches can be combined. He added that the two parties should be able to combine concepts such as tax simplification and joint tax returns for spouses. "We are open to discussion, but concessions that can be made are limited by common sense," he said.
Any agreement the two sides reach could founder, though, on the two parties timing requirements for introducing changes to the tax code. Balcerowicz is pressing for the government to immediately submit legislation to the Sejm so that far-reaching changes could take effect next year. Zak said that AWS feels such quick changes are unrealistic and favors a more gradual approach.
"A taxpayer should not be taken by surprise," he said. "If the deductions are to be eliminated, it can't be announced in September when people have already planned their housing investments."
Zak added that talks between the coalition partners could take weeks. "With Sept. 20 as a deadline (as suggested by Balcerowicz) for the government's proposal of tax changes, it will have no chance of being accepted by the Sejm," he said. "Let's make real politics."
The UW has viewed these calls for caution as a stall tactic, however, and although AWS has its doubts about Balcerowicz's radical reform plan, more and more business groups have joined in calls for adoption of the tax package.
Members of the Tax Coalition, a grouping of think tanks and business associations, were joined last week by the American Chamber of Commerce in Poland and the Foreign Investors Chamber of Industry and Commerce in strongly endorsing the goals in the "White Book of Taxes."
The groups argued that Poland has a unique opportunity to reform its tax system while it has a growing and sound economy.
"This innovative approach will attract foreign investment," David Bailey, president of International Paper Poland said at a meeting organized by AmCham to support the plan. "These investments are critical for creating new jobs, so the project deserves a full debate on its merits."
Leslaw A. Paga, chairman and managing partner at Deloitte & Touche, said that the tax system is an important factor taken into account by foreign investors considering Poland. But he added that calls by investors in support of the reform are not likely to have much influence on politicians. "They think in terms of their electorate's expectations," said Paga, a long-time Solidarity insider and the first Securities Commission chairman. "It is just a question of political bargaining."
And on the political end, the lobbying is not strong enough to push the tax reform plan through, he said. "I fear that the final decision will be delayed," Paga said. "There will be much talk that it is a great idea, but finally it will die."
Zak echoed this realpolitik view, saying that support from such business groups, especially foreign ones, should not be over-estimated.
"A regular taxpayer in Poland does not care whether Americans support the tax reform proposed by Balcerowicz," he said. "We have to plan our moves in line with the political reality in the Sejm."
