Economists criticize tax amnesty plan as unrealistic

Economists denounced as overly optimistic the government's plan to raise an estimated zł. 500 million ($122 million) through a tax amnesty scheme last week, saying that tax evaders would never come forward to reveal their real income and that the tax office wouldn't be able to reign in future dodgers anyway. In exchange for a one-off payment of 7.5% of the value of all undeclared income earned during 1996-2001, the government is hoping to encourage tax evaders to fess up and cough up. Also, everyone who makes a "major purchase" will be required to file annual property declarations in the future. "The zł. 500 million ($122 million) figure is taken out of thin air," said Janusz Jankowiak, the chief economist of BRE Bank. "The proceeds will be much lower." The Democratic Left Alliance (SLD) bill, proposed by Finance Minister Grzegorz Kołodko, went to Parliament last week for consideration. The draft also calls for property declarations to be filed by the country's wealthiest citizens. While the tax amnesty scheme is intended to settle past accounts, the property declaration is expected to clamp down on future dodgers. "Our intention is to drag citizens' praiseworthy business activities out of the shadow economy," Kołodko told a news conference.

"I estimate the number of people who conceal their revenue very roughly at some 500,000," Wojciech Ciesielski, the deputy finance minister, told the WBJ. Economists said the measure was a waste of time. "Most of those who haven't disclosed their incomes will not rush to tax offices now," said Krzysztof Rybiński, the chief economist at Bank Przemysłowo-Handlowy PBK. According to Jankowiak, a tax amnesty would only work if dodgers were offered a guarantee that the tax offices would treat them fairly and in the same way as other citizens. "Nobody is giving them such a guarantee," Jankowiak said. "The officer dealing with a particular taxpayer may, for instance, refer the case to the prosecutor." He said the bill gives tax officers too much power and allows for discretionary decisions. Tax evaders would not take the risk, he added. "If the risk resulting from disclosing your secrets is higher than that of staying in the shadow economy, then the evaders will not own up," Jankowiak said. The government hopes the law will discipline taxpayers. "Until now, our efforts to catch tax evaders resembled hunting a rat in a dark room, where the inspector isn't a cat, and the rat is wearing night-vision goggles," the Finance Ministry's Ciesielski said. "This law turns on the light." Economists discounted that notion, blaming the tax offices for their own inefficiency in collecting the nation's dues.

"Powers and procedures necessary to repress tax evasion are already in place," Rybiński said. "People suspected of concealing their income can be verified on the basis of existing regulations." Tax offices received 183,000 letters last year from citizens who claimed that other Poles had evaded taxation, Ciesielski said. But only in 29 cases was the tax due levied, supplying state coffers with a mere zł. 3 million ($732,000). However, he said that the tax office's technological skills were improving. "At the end of last year, we finished a training program for 600 people on how to track down concealed incomes," he said. Economists were unimpressed by the Finance Ministry's efforts. "Beside the law, you need efficient tax execution personnel, and their work so far doesn't give many reasons for optimism," said Marcin Mróz, a senior economist at Societe Generale. They also warned that the tax office would have more work once taxpayers began to file their annual property declarations. "I cannot imagine that tax officers will now effectively screen some 3.5 million declarations and be able to analyze people's acquisitions for the past five years," Rybiński said. "It will be done randomly, just like it's done now."