Business groups start fighting to save corporate tax cut
Business lobbyists have shifted into overdrive in what they are predicting will be a two-week push to get the Sejm to pass a law that would lower the corporate tax rate.
The effort has sprung to life after a Sejm committee 10 days ago rejected a government plan to cut corporate taxes next year to 30% from the current 32%. The surprise vote threw planned tax legislation into doubt and caused lobbyists to gear up for the Sejm vote.
"The outcome is uncertain, but we will continue the battle in the general assembly," said Witold Michalek, deputy president of the Business Center Club (BCC). "We will argue and try to make the deputies realize the advantages of these tax changes, it lowers the level of taxes so corporations and entrepreneurs have more money to invest, and that means more employment."
The tax proposals are closely tied to the Sejm's budget talks, which began last Thursday and could last up to two weeks.
Early last week, the BCC launched its lobbying effort with a press conference, while other groups began to speak out more vocally about the need for the tax cut.
"The role of the business community is to create wealth and growth," said Cristiano Pinzauti, president of Getronics and chairman of the European Union Chambers Forum. "If we feel a decision threatens either of those goals, we have to speak up."
The need to do so was unexpected given that the government has supported corporate tax cuts. However, on Oct. 8 the Sejm's Public Finance Commission rejected the government's tax proposals, including next year's corporate tax reduction as well as further annual 2% cuts until 2004 to a level of 22%.
Both proposals were expected to sail through the committee as deputies from the governing Solidarity Election Action (AWS)-Freedom Union (UW) coalition hold over half the committee's 36 seats. But many AWS deputies did not attend the session, and others voted against their own government's proposals. The opposition Social Democratic Alliance (SLD) was thus able to engineer a committee vote against the proposals. In rejecting them, the opposition claimed that such experiments may reduce revenue and destabilize public finances.
The pro-cut lobbying effort now focuses on the several dozen AWS deputies seen as wavers or potential renegades, said Jerzy Malkowski, director of the BCC's lobbying operations.
"There is a threat that enough coalition deputies could vote against their own party and kill the proposal," Malkowski said.
Business interests deplored the committee's action, but most expressed hope that the government would be able to discipline its deputies before the proposals come to a vote before the whole Sejm.
"This is a very unfortunate decision," said the BCC's Michalek. "Tax reform is one of the basic changes that needs to be made."
The BCC had lobbied intensely for the changes, arguing that they would increase the tax law's transparency and simplicity.
"We are against the current tax system," said Jeremi Mordasewicz, vice president of the BCC. "It is better to have lower taxes than to keep the investment incentives which only 2% of businesses use."
The committee's action does not scuttle the proposals entirely though. They will come up before the whole Sejm probably by the end of October, Mordasewicz said. "This decision was only a recommendation. Now (AWS leader Marian) Krzaklewski, (Prime Minister Jerzy) Buzek and (Finance Minister Leszek) Balcerowicz need to push all the AWS and UW deputies to vote for it."
These party leaders will be working to keep their deputies in line for votes on the budget and as part of that on the tax plan. The fear is that if opposition deputies or renegade AWS members try to force too many changes in the government's budget, "it would mean the fall of the government," Mordasewicz said. He sees many similarities between the present situation and the events of early 1993, when Solidarity deputies broke ranks and caused the collapse of the Suchocka government, which led to elections that swept the SLD and Peasant Party into power.
"If the budget fails, early elections will be held and the SLD will win half the seats," Mordasewicz said.
Other government observers played down the significance of the committee's action.
"It won't be upheld by the whole Sejm," said Pawel Szalamacha of the Adam Smith Research Centre. "I would call this a coalition hiccup. They did not pay enough attention to the committee's proceedings. But this week the coalition has signed a new cooperation agreement, and they will be focusing much more on disciplining their deputies."
While he was optimistic that the tax changes will be approved by the whole Sejm, Szalamacha agreed that the government's future hangs in the balance.
"The coalition must demonstrate that they are capable of running the country," Szalamacha said. "If they reject the budget and the tax law, it will prove the lack of maturity within the coalition deputies. The president could order new elections."
The effort has sprung to life after a Sejm committee 10 days ago rejected a government plan to cut corporate taxes next year to 30% from the current 32%. The surprise vote threw planned tax legislation into doubt and caused lobbyists to gear up for the Sejm vote.
"The outcome is uncertain, but we will continue the battle in the general assembly," said Witold Michalek, deputy president of the Business Center Club (BCC). "We will argue and try to make the deputies realize the advantages of these tax changes, it lowers the level of taxes so corporations and entrepreneurs have more money to invest, and that means more employment."
The tax proposals are closely tied to the Sejm's budget talks, which began last Thursday and could last up to two weeks.
Early last week, the BCC launched its lobbying effort with a press conference, while other groups began to speak out more vocally about the need for the tax cut.
"The role of the business community is to create wealth and growth," said Cristiano Pinzauti, president of Getronics and chairman of the European Union Chambers Forum. "If we feel a decision threatens either of those goals, we have to speak up."
The need to do so was unexpected given that the government has supported corporate tax cuts. However, on Oct. 8 the Sejm's Public Finance Commission rejected the government's tax proposals, including next year's corporate tax reduction as well as further annual 2% cuts until 2004 to a level of 22%.
Both proposals were expected to sail through the committee as deputies from the governing Solidarity Election Action (AWS)-Freedom Union (UW) coalition hold over half the committee's 36 seats. But many AWS deputies did not attend the session, and others voted against their own government's proposals. The opposition Social Democratic Alliance (SLD) was thus able to engineer a committee vote against the proposals. In rejecting them, the opposition claimed that such experiments may reduce revenue and destabilize public finances.
The pro-cut lobbying effort now focuses on the several dozen AWS deputies seen as wavers or potential renegades, said Jerzy Malkowski, director of the BCC's lobbying operations.
"There is a threat that enough coalition deputies could vote against their own party and kill the proposal," Malkowski said.
Business interests deplored the committee's action, but most expressed hope that the government would be able to discipline its deputies before the proposals come to a vote before the whole Sejm.
"This is a very unfortunate decision," said the BCC's Michalek. "Tax reform is one of the basic changes that needs to be made."
The BCC had lobbied intensely for the changes, arguing that they would increase the tax law's transparency and simplicity.
"We are against the current tax system," said Jeremi Mordasewicz, vice president of the BCC. "It is better to have lower taxes than to keep the investment incentives which only 2% of businesses use."
The committee's action does not scuttle the proposals entirely though. They will come up before the whole Sejm probably by the end of October, Mordasewicz said. "This decision was only a recommendation. Now (AWS leader Marian) Krzaklewski, (Prime Minister Jerzy) Buzek and (Finance Minister Leszek) Balcerowicz need to push all the AWS and UW deputies to vote for it."
These party leaders will be working to keep their deputies in line for votes on the budget and as part of that on the tax plan. The fear is that if opposition deputies or renegade AWS members try to force too many changes in the government's budget, "it would mean the fall of the government," Mordasewicz said. He sees many similarities between the present situation and the events of early 1993, when Solidarity deputies broke ranks and caused the collapse of the Suchocka government, which led to elections that swept the SLD and Peasant Party into power.
"If the budget fails, early elections will be held and the SLD will win half the seats," Mordasewicz said.
Other government observers played down the significance of the committee's action.
"It won't be upheld by the whole Sejm," said Pawel Szalamacha of the Adam Smith Research Centre. "I would call this a coalition hiccup. They did not pay enough attention to the committee's proceedings. But this week the coalition has signed a new cooperation agreement, and they will be focusing much more on disciplining their deputies."
While he was optimistic that the tax changes will be approved by the whole Sejm, Szalamacha agreed that the government's future hangs in the balance.
"The coalition must demonstrate that they are capable of running the country," Szalamacha said. "If they reject the budget and the tax law, it will prove the lack of maturity within the coalition deputies. The president could order new elections."
