Parliamentarians seek to abolish VAT on school computers
By : Juliet D. Golden
Eager to learn: But the new VAT law could stifle online study.
Parliamentarians from the Sejm's education committee are scrambling to introduce changes to Poland's tax laws that will protect computers bound for schools from being hit with value-added tax (VAT).
Before this year, computers imported to Poland for educational purposes were excluded from VAT, leading to a boom in the number of schools outfitted with computers and Internet workshops. However, as of Jan. 1, all computers, regardless of origin or destination, are being slapped with a 22% surcharge in the form of VAT.
For Grazyna Staniszewska, a Freedom Union (UW) parliamentarian who chairs the Sejm's education committee, more VAT means 4,000 fewer computers in Polish classrooms this year.
About zl. 100 million ($25 million) is reserved in this year's budget to hook up Polish schools to the Internet. While these provisions are on par with last year, for politicians and educators the introduction of VAT means that the number of computers purchased will likely decrease by 25%.
"Because VAT came into effect as of Jan. 1, zl. 100 million ($25 million) is a lot less than last year," Staniszewska said.
With a ratio of one computer per 40 students, Poland lags behind IT infrastructure standards found in the United States and Western Europe. However, since 1998 the government has spent upward of zl. 225 million ($56.3 million) to connect about 6,000 schools to the Internet. Under the program, each school receives 10 computers fitted with Internet access capabilities. The program has meant that Internet access in Polish schools has increased by 30% since 1998, when one computer was being shared by 60 students.
"We are pleased with these successes, but we are still far behind other countries," said Jerzy Dalek, an adviser at the Education Ministry responsible for IT issues.
For advocates fighting to get Polish children hooked up to the information highway, the success during the past few years can be attributed in part to computers that have been imported VAT free. To avoid VAT, Polish computer producers such as JTT sent computers bound for schools to nearby countries, only to re-import them VAT free.
But now, due to the changes in the law, the loophole has disappeared and politicians are fighting to prevent a slowdown in getting Polish kids hooked up to the Net.
In the Sejm last month, Staniszewska proposed changes to the tax code that would keep sales of computers bound for schools VAT-free for the next few years, until Poland joins the European Union (EU).
"We can use the time before we enter the EU, whether it's two years or four years, to build up our computer base in schools," Staniszewska said.
Under EU regulations, only computer exports can be exempt from VAT, Staniszewska said. Computer sales would have to be levied with VAT by the time Poland joins the EU.
While Staniszewska's initiative received backing from all parties in an initial vote last month, the changes have a long legislative path to travel before they are introduced into law. However, now Staniszewska is locked in a race to have changes introduced before the Education Ministry's tender, slated for May, to supply 2,200 more schools with computers.
"It's a race to make it in time so that there will be 2,200 (more) workshops and not just 1,800," she said.
For Staniszewska, the more computers purchased, the faster Polish children will have access to the Internet. School children in the United States have the easiest Internet access. There, one computer is shared among two to five students. Access is slightly worse in Western Europe, according to Poland's Education Ministry, where on average 10 children have to share one computer.
For teachers in Poland, improving the IT infrastructure in Polish schools is not only about making children computer literate, it is also a tool to force deeper changes in the way children learn. Traditionally Poland's schools tended to teach children a curriculum more based on learning by rote. According to educators, Internet access has introduced creativity and initiative not only on the part of teachers, but from the students themselves.
"Before, children were closed off, now they are open to looking for information by themselves, without necessarily asking their teacher for help," said Teresa Wojciechowska, a computer education specialist at High School No. 3 in central Warsaw. Last August, her school received 15 computers with permanent Internet access as a part of the Education Ministry's Internet program. "Now, children go on the Internet and look for information by themselves and they aren't afraid to dig."
However, in their rush to get Polish children online, educators and politicians may be victims of their own success. The impulse for making changes in VAT rules came last year after Poland's second-largest computer manufacturer, Wroclaw-based JTT, was charged with tax evasion related to a supply of computers earmarked for schools around Poland. To avoid paying VAT on a 1998 Education Ministry order, JTT exported the computers to companies in the Czech Republic and Germany, and then imported the computers back to Poland. By sending the computers on a round-trip excursion, JTT got by without paying VAT on about zl. 25 million ($6.3 million) worth of computer hardware. According to Wroclaw police, who filed the original charge, that meant the company deprived the national coffers of around zl. 7 million ($1.8 million).
JTT maintains its innocence. Admitting that computers destined for Polish schools had taken an international route before landing in classrooms here, JTT repeated it had not broken any laws, but merely used loopholes in existing tax code to avoid incurring charges. Moreover, politicians and JTT officials have argued that the aim was not private gain through tax evasion, but getting the greatest number of computers into Polish schools for the least amount of money.
"In the tender process, companies offered lower prices because they said they were going to send products abroad, that way they avoided the 22%," Staniszewska said. "This procedure was practiced by all the companies that assemble computers in Poland, not just JTT, (that way) the Education Ministry was able to buy more computers."
Since being charged with tax evasion, JTT has been hit with audits from tax authorities in Wroclaw and has paid about zl. 10 million ($2.5 million) in penalties and back tax, according to Blazej Miernikiewicz, spokesman for JTT. However, Miernikiewicz said JTT has filed an appeal with the Supreme Administrative Court (NSA). The NSA ruling could prove crucial not only for the company to get back paid taxes, but also to clear company management of any criminal wrongdoings.
While JTT is far from being in the clear, the storm around the company was also the key factor in the Finance Ministry's move to rid the tax law of incongruities.
"It all started with JTT," Staniszewska said.
