Public finance plan would see PIT, CIT and VAT locked into flat 18% rate

Its main points are limiting public spending, introducing major changes to the tax system and a reform of public finances management. It is possible that a new unified tax rate of 18% will be introduced for PIT, CIT and VAT. Reform is, in part, necessary because of EU's stability and development pact, but mainly because Poland needs to create conditions favorable for stable economic growth. Minister Gronicki believes now is the best time for such changes as currently the economic situation is favorable, making reforms easier to implement. The strategy will be introduced in stages in order not to slow down economic growth. It is thus proposed to introduce new VAT rates from next year. The 0, 3, 7 and 22% levels would be replaced by 7, 12 and 20%. In 2007 there would be only two rates: 14 and 19% and in 2008 there would remain only one - 18%. PIT rates would also change, they would be 28 and 35% in 2006, 18 and 25% in 2007 and finally 18% in 2008. The reform would result in lowering public spending by zł.4.53 billion (0.45% GDP) in 2006 and by zł.12.4 billion in 2007. (Rzeczpospolita, March 12-13, pp. A1, B1, B2) D.W.