No more tax, as of June 24
After an audit of 52 tax offices, the NIK concluded that the number of cases in which complaints against the authorities were upheld by the court has risen dramatically. Last year, the authorities were ordered to repay zł.1.25 billion in unduly claimed taxes, representing 48.3% of instances when a taxpayer appealed against the tax man's decision.
The Supreme Administrative Court (NSA) threw out 90.2 percent of all the sentences passed by the lower courts. All this means that the high costs of the judicial process and interest rates on unduly claimed taxes claim an ever larger share of tax revenue.
The sound of uncorking champagne bottles was heard in the boardrooms across the nation last Thursday, as the Adam Smith Center, a think-tank, announced that "freedom from taxes day" fell on June 24 this year. The day was celebrated for the fourth year running.
Every year, experts at the Adam Smith Center calculate what proportion of the nation's income is consumed by taxes. It is then artificially assumed that, if everyone starts working towards paying off their taxes on January 1, there comes a day when they have made enough to start earning for themselves.
This year the date fell on June 24, which means that by that day the tax man's monstrous appetite was finally satiated. This is an improvement on the previous year, when taxes consumed all incomes earned before June 28, but significantly worse than in 2000, when the date was as much as ten days earlier. This shows a steady increase of tax burdens over recent years, even as the government has made a great show of lowering tax rates.
The Business Journal celebrated "freedom from taxes day" by interviewing a number of businesspeople on the subject of taxes. While most expressed satisfaction with the cut in corporate income tax to 19 percent this year, and called its current level "acceptable," the common complaint was that the laws remain incomprehensible and are changed on a daily basis. The one big change anticipated with excitement by businesspeople has been that a business, or an individual, will be able to apply for a binding interpretation of the law and would not then be held accountable for any misdemeanors, provided they abide by that interpretation. This, businesspeople hope, will limit abuses by the tax man, made possible by vague regulations that are open to interpretation.
Here are some of the interesting things we were told on the occasion of last week's celebrations.
Andrzej Kurek, chief financial officer at NTT Systems, a hardware maker:
For our company, the tax situation has improved due to lower corporate tax rates. However, the most significant burden for our company is not income tax, but the very high non-wage costs of labor, including benefits and insurance. These constitute a very significant drain on our resources and make hiring new workers an extremely costly enterprise.
Corporate tax rates are an important consideration for foreign investors thinking of coming to this country. That is why German Chancellor Gerhard Schroeder criticized this country for rates that are, in his opinion, too low. From our point of view they are still too high. If you look at a country that is still a developing one, then consumers and companies need incentives, such as lower taxes.
From my point of view, tax burdens are a very significant disincentive to investment in this country. It is, however, difficult to say if that is more of a problem than incomprehensible and arbitrary tax laws. The laws are changing all the time, which becomes confusing for businesses. Managers have to rewrite the rules for their employees, and a lot of time is spent retraining and adjusting payroll IT systems, which means that less time is left for the actual running of the company.
I cannot give you my honest opinion on whether those huge amounts of tax money are actually well spent. I would say only that most people in the country would say that they are not.
Robert Piotrowski, chief financial officer of CompFort Meridian, an IT firm:
The CIT rate is quite reasonable this year, but the real problem for us is that the new laws are inconsistent with other legal acts, leading to a lot of confusion in the tax office's interpretations. This is a much more important problem than the actual rates, as companies spend a lot of time talking to the tax office and trying to figure out what the laws actually mean. For example, we were once forced to wait for six months before the money we had paid in undue taxes was returned to us.
This can act as a powerful deterrent for potential investors. Another key issue is that of the increase in taxes on dividends. Last year we had 15 percent income tax on dividends, now we have 19 percent, and this has greatly affected foreign investment. It's hard to be established here and then find that taxes are a bigger problem than you originally thought for your business. I've met a lot of foreigners thinking of coming in, and it's harder for them to set up companies here, because the tax laws are very complicated for foreigners.
I would not say that the tax money is well spent. Yes, the government needs revenue, but I would like to see changes in what it does with that money.
Łukasz Wejchert, chief executive officer of onet.pl, an Internet portal:
Complicated laws, which are open to arbitrary interpretation, are probably a much greater problem for investors than tax rates. If you have a transparent structure, any problems are easier to fix.
The Supreme Administrative Court (NSA) threw out 90.2 percent of all the sentences passed by the lower courts. All this means that the high costs of the judicial process and interest rates on unduly claimed taxes claim an ever larger share of tax revenue.
The sound of uncorking champagne bottles was heard in the boardrooms across the nation last Thursday, as the Adam Smith Center, a think-tank, announced that "freedom from taxes day" fell on June 24 this year. The day was celebrated for the fourth year running.
Every year, experts at the Adam Smith Center calculate what proportion of the nation's income is consumed by taxes. It is then artificially assumed that, if everyone starts working towards paying off their taxes on January 1, there comes a day when they have made enough to start earning for themselves.
This year the date fell on June 24, which means that by that day the tax man's monstrous appetite was finally satiated. This is an improvement on the previous year, when taxes consumed all incomes earned before June 28, but significantly worse than in 2000, when the date was as much as ten days earlier. This shows a steady increase of tax burdens over recent years, even as the government has made a great show of lowering tax rates.
The Business Journal celebrated "freedom from taxes day" by interviewing a number of businesspeople on the subject of taxes. While most expressed satisfaction with the cut in corporate income tax to 19 percent this year, and called its current level "acceptable," the common complaint was that the laws remain incomprehensible and are changed on a daily basis. The one big change anticipated with excitement by businesspeople has been that a business, or an individual, will be able to apply for a binding interpretation of the law and would not then be held accountable for any misdemeanors, provided they abide by that interpretation. This, businesspeople hope, will limit abuses by the tax man, made possible by vague regulations that are open to interpretation.
Here are some of the interesting things we were told on the occasion of last week's celebrations.
Andrzej Kurek, chief financial officer at NTT Systems, a hardware maker:
For our company, the tax situation has improved due to lower corporate tax rates. However, the most significant burden for our company is not income tax, but the very high non-wage costs of labor, including benefits and insurance. These constitute a very significant drain on our resources and make hiring new workers an extremely costly enterprise.
Corporate tax rates are an important consideration for foreign investors thinking of coming to this country. That is why German Chancellor Gerhard Schroeder criticized this country for rates that are, in his opinion, too low. From our point of view they are still too high. If you look at a country that is still a developing one, then consumers and companies need incentives, such as lower taxes.
From my point of view, tax burdens are a very significant disincentive to investment in this country. It is, however, difficult to say if that is more of a problem than incomprehensible and arbitrary tax laws. The laws are changing all the time, which becomes confusing for businesses. Managers have to rewrite the rules for their employees, and a lot of time is spent retraining and adjusting payroll IT systems, which means that less time is left for the actual running of the company.
I cannot give you my honest opinion on whether those huge amounts of tax money are actually well spent. I would say only that most people in the country would say that they are not.
Robert Piotrowski, chief financial officer of CompFort Meridian, an IT firm:
The CIT rate is quite reasonable this year, but the real problem for us is that the new laws are inconsistent with other legal acts, leading to a lot of confusion in the tax office's interpretations. This is a much more important problem than the actual rates, as companies spend a lot of time talking to the tax office and trying to figure out what the laws actually mean. For example, we were once forced to wait for six months before the money we had paid in undue taxes was returned to us.
This can act as a powerful deterrent for potential investors. Another key issue is that of the increase in taxes on dividends. Last year we had 15 percent income tax on dividends, now we have 19 percent, and this has greatly affected foreign investment. It's hard to be established here and then find that taxes are a bigger problem than you originally thought for your business. I've met a lot of foreigners thinking of coming in, and it's harder for them to set up companies here, because the tax laws are very complicated for foreigners.
I would not say that the tax money is well spent. Yes, the government needs revenue, but I would like to see changes in what it does with that money.
Łukasz Wejchert, chief executive officer of onet.pl, an Internet portal:
Complicated laws, which are open to arbitrary interpretation, are probably a much greater problem for investors than tax rates. If you have a transparent structure, any problems are easier to fix.
