Flat tax next year?

Zbigniew Chlebowski, head of the ruling Civic Platform's (PO) parliamentary club, announced last week. PO came to power in October partly on a pro-business platform which included the introduction of a low, single-rate income tax by 2011. However, Chlebowski said that implementation could come as early as January 2009, since previous proposals that a dual-rate system be set up first wouldn't make much sense.

"Implementing two tax rates at the level of 18 percent and 32 percent - with the threshold for the higher rate at zł.85,000 - at the beginning of next year would mean that 99 percent of taxpayers would be paying a flat tax anyway," he was quoted by daily Rzeczpospolita as saying. "Considering that, it would be better to just implement one tax rate from the beginning."

Currently, Poland has a progressive personal income tax system, with three rates - at 19, 30 and 40 percent.

Analysts worry that the introduction of a flat tax could initially lead to lower budget revenues, making it more difficult for Warsaw to meet the fiscal requirements for euro adoption. The government has not revealed how the lower taxes might affect budget revenues, however.

Slovakia, which will adopt the euro next year, has had a flat tax since 2004 and saw a surge in budget revenues after its introduction.