Family tax relief could "ruin" budget

As one of its final legislative acts, the Senate put its stamp on a bill which created a new form of assistance for families. The original proposal offered a child tax credit of zł.572 per child, but this was doubled shortly before the vote to zł.1,145. The move will cost the budget around zł.6.5 billion, rather than the previously estimated zł.3.5 billion, which in turn means a larger-than-expected budget deficit.

Minister of Finance Zyta Gilowska warned against what she viewed as a fiscally irresponsible tax cut. She also pointed out that money has to be taken out of other projects when the budget deficit grows because of its zł.30-billion ceiling. Before the law was passed, the budget deficit for 2008 had been estimated at zł.28 billion.

"Help for families is needed in Poland, but it shouldn't ruin the budget. Especially when Poland needs budget cuts," Gilowska said.

Last week Gilowska raised the Finance Ministry's estimate for the budget deficit to just zł.28.6 billion, after reworking the expected income from dividends from state-owned firms. Gilowska said she hoped to obtain zł.3.5 billion in budget income from

dividends from state-owned companies, almost double the zł.2 billion which had been mooted earlier.

The child tax credit aims to promote parenthood among middle- and high-income earners, but due to the new law several million low-income families will stop paying income tax altogether, putting a strain on the budget. Some families will also be unable to take advantage of the new law. These include those who do not pay any income tax at all, such as farmers and those whose incomes are lower than zł.3,013 annually. These families are generally eligible for a family allowance, however.

Joanna Kluzik-Rostkowska, the Minister of Labor and Social Policy, said the implementation of the law would cost much more than the current family policy, which offers a lot of opportunities for families with multiple children. She suggested that the money would be better spent on school textbooks.

Finance Minister Gilowska opined that Poland is still too poor a country to be spending money on upper-middle class families.

Not everyone sees the new law as a bad thing, however. "Our society is aging. Around 30 percent of young Poles have already gone abroad. Poland needs any long-term program that will stimulate the birth rate. The French and German examples show that the role of the state is necessary in this issue," said Michał Macierzyński, an analyst from Bankier.pl.

"Maybe our law isn't helpful for low-income families or farmers," he added. "But the lowest birth rate is among high-income city dwellers. These families need persuasion. Farmers will get a lot of financial help anyway."

Anna Kalembasiak