Bankers push savings tax exemption

The nation's dominant banking association petitioned the government last week to partially lift a tax on interest earned from savings. The proposal - forwarded to the Finance Ministry last week following the recent annual meeting of the Association of Polish Banks (ZBP) - is the latest tack in a row between financial institutions and a government keen to draw new tax revenue to a budget running deeply in the red. ZBP called on officials to lift a 20% tax on interest income from savings accounts fixed for three years or longer. The measure taxing all savings accounts was pushed into law last fall by the newly elected Democratic Left Alliance (SLD) government. However, implementation of the tax was delayed for months as the SLD, banks and customers wrestled over the details. The government has collected revenue from the measure since March 1. "The delay was to allow banks and customers to have time to prepare," said Zofia Ogińska of the Finance Ministry's press office. Ogińska declined to comment on the proposal from the 97-member strong ZBP, saying the ministry is still considering its response. "We will discuss this with the government over the next few months at cabinet meetings," said Krzysztof Pietraszkiewicz, ZBP general director. "This proposal will strengthen the willingness to save and invest - both to the benefit of the budget." The SLD expected zł. 1.35 billion ($337 million) in additional revenue from the tax, which won parliamentary approval in early November. Within weeks, banks reacted by setting up new non-taxable accounts for clients designed to bypass the legislation. Customers largely snapped up the offers or moved their money into investment funds, while household deposits plummeted at institutions like Bank Zachodni WBK (BZ WBK), which recorded its worst monthly decline of zł. 1.8 billion ($450 million) in November.

"The last two to three quarters have seen very sluggish growth in disposable incomes," said Krzysztof Rybiński, head economist at BZ WBK. "Both this (and tax prospects) are factors in the decline of deposits ... it continues to harm Polish growth prospects." The tax marked the beginning of a series of public spats between the seven-month-old SLD-led government and a large chunk of the banking community. In November, Prime Minister Leszek Miller criticized banks' efforts to avoid the tax as "anti-Polish," while in March Treasury Minister Wiesław Kaczmarek bemoaned foreign-run banks making "investment decisions that do not benefit the Polish economy." The sparring continues in various ZBP circles, and some doubt the government is prepared to consider any changes to the tax. "Prime Minister Miller and (Finance Minister) Marek Belka are very hard-working people, and perhaps they are overworked," said one ZBP official, who asked to remain anonymous. "They forget that banks do fulfill their obligations ... we are law-abiding enterprises. "We hope the government will listen, but I think nothing will happen," the official added.