Flat tax gaining popularity

Poles are warming up to the idea of a flat personal income tax, according to the Adam Smith Center, a Warsaw-based think tank. In a March survey carried out by Instytut Badania Rynku i Opinii Estymator, 34% of respondents said they favored a flat tax, 9% a poll tax and 57% a progressive tax. Four years ago 67% of respondents said they preferred a progressive tax and 30% a flat tax. By 2005, flat tax and poll-tax supporters should roughly equal the number of progressive-tax advocates, Estymator said. "One can guess that people are fed up with the waste of time that is so characteristic of the (current) complicated and strenuous progressive tax system we have in Poland," said Krzysztof Dzierżawski, an adviser to the Adam Smith Center's management. The survey was conducted a month before the April 30 tax-filing deadline - when people are more apt to realize how complicated the system is, Dzierżawski said. "The results of the current survey may be useful for all supporters of the simplification of the tax system," he said. "According to yet another survey conducted in early April by CBOS (a public-opinion research center) and published by Trybuna Śląska, 80% of respondents spoke in favor of reforming the current tax system and 66% wanted lower taxes. Those results speak even louder for the simplification of Poland's fiscal system." Although Poles are loosening up over the concept of simplifying taxes, Dzierżawski said that flat-tax enthusiasts have little or no chance of seeing their tax regime implemented.

"Tax advisers and public administration personnel from tax offices will do their best to torpedo any initiative to simplify the tax system," Dzierżawski said. "A complicated system works for all those groups of public officers and tax advisers whose interests overlap. There are many examples of advisers who used to work for the Finance Ministry and now advise on how to avoid paying taxes." Dzierżawski was also skeptical about the expected impact of tax changes being planned by the government under the "Entrepreneurship First" package of reforms. "Most of the changes in the package refer to tax law but instead of 'entrepreneurship first' they should have been described as 'tax advising first,' " Dzierżawski said. "The regulations stipulated in that legislative package can make a difference provided one can hire a tax adviser." The last time the concept of a flat personal income tax generated widespread public interest was in 1998, when Leszek Balcerowicz, the finance minister and deputy prime minister in the previous government, proposed introducing a flat 22% personal income tax in 2000 and a corporate income tax rate of 22% in 2002. In the end, the bill that became law excluded the flat tax. In 1999, President Aleksander Kwaśniewski vetoed a lowering of personal income taxes leaving the three-tier structure of 19%, 30% and 40%. However, he cut corporate taxes to 30% in 2000 and another two percentage points annually until 22% in 2004. Balcerowicz's 1998 proposal could have become one of the most radical overhauls of a tax system in Europe. Today, Estonia (26%) and Russia (13%) have flat-tax systems.