INTERVIEW-IMF Backs Planned Polish Tax Reform
The tax bill, which cuts corporate taxes and the fiscal burden on the rich, passed parliament but still has to be signed into law by President Aleksander Kwasniewski, who is under pressure from opposition parties to veto the measure.
"We are very positive on the tax reform, which represents significant progress in improving Poland's tax system," Franciszek Rozwadowski told Reuters in an interview on Thursday.
"The proposed system, which will be simpler and with lower rates, will create an improved environment for investment and economic activity generally, therefore it should increase the rate of economic growth," Rozwadowski said.
He said that the tax reform must be accompanied by a significant lowering of Poland's fiscal, or general government deficit, which would help to keep macroeconomic equilibrium.
"This tax reform and the reduction of tax rates will require restraint on the growth of government expenditures and this will be difficult. It will require a good measure of political will," he said.
He added that the IMF thought there was "scope in Poland for this kind of expenditure restraint."
"A combination of a simpler system of lower taxes and a smaller government would be a cornerstone of a very dynamic Polish economy," Rozwadowski said.
Poland's general government deficit is expected to reach some 3.0-3.5 percent of gross domestic product this year versus last year's 3.5 percent shortfall. The government had hoped to cut this deficit to around two percent of GDP in 2000 but recently signalled it may have to spend more than expected on a pension reform, expanding the deficit of its central budget to 2.2-2.3 percent of GDP.
Rozwadowski said this would not be a loosening of policy if the funds were targeted at the pensions savings plan.
A government source said on Wednesday that the ailing state social security office needed extra cash because of the unexpected popularity of private pension funds.
"If this is so, the widening would certainly not represent any slackening of fiscal discipline," Rozwadowski said.
He also applauded the scrapping of tax reliefs on housing. Support for housing construction should come from a well targeted government support programme, he said.
"We are very positive on the tax reform, which represents significant progress in improving Poland's tax system," Franciszek Rozwadowski told Reuters in an interview on Thursday.
"The proposed system, which will be simpler and with lower rates, will create an improved environment for investment and economic activity generally, therefore it should increase the rate of economic growth," Rozwadowski said.
He said that the tax reform must be accompanied by a significant lowering of Poland's fiscal, or general government deficit, which would help to keep macroeconomic equilibrium.
"This tax reform and the reduction of tax rates will require restraint on the growth of government expenditures and this will be difficult. It will require a good measure of political will," he said.
He added that the IMF thought there was "scope in Poland for this kind of expenditure restraint."
"A combination of a simpler system of lower taxes and a smaller government would be a cornerstone of a very dynamic Polish economy," Rozwadowski said.
Poland's general government deficit is expected to reach some 3.0-3.5 percent of gross domestic product this year versus last year's 3.5 percent shortfall. The government had hoped to cut this deficit to around two percent of GDP in 2000 but recently signalled it may have to spend more than expected on a pension reform, expanding the deficit of its central budget to 2.2-2.3 percent of GDP.
Rozwadowski said this would not be a loosening of policy if the funds were targeted at the pensions savings plan.
A government source said on Wednesday that the ailing state social security office needed extra cash because of the unexpected popularity of private pension funds.
"If this is so, the widening would certainly not represent any slackening of fiscal discipline," Rozwadowski said.
He also applauded the scrapping of tax reliefs on housing. Support for housing construction should come from a well targeted government support programme, he said.
