Red Tape Hot Box on Monthly tax declarations

In the days when inflation was 800% a year, it was understandable that the tax authorities wanted to collect tax rounded up to the nearest grosz in full every month. The country's nascent Third Republic couldn't afford slow corporate payers of VAT, PIT, or ZUS withholding the money they owed for, say, six weeks. Why? Because their payments would be worth half of what they were on the day that they were due.

But today with inflation at 0.3%, why can't firms settle their corporate income, VAT and payroll taxes annually like they can in most European Union countries? What's the sense of keeping monthly payments?

While completing tax returns is a huge job-creation scheme, it does not make our country more internationally competitive. One of our readers worked in a foreign company that also had operations here. The Polish office employed 90 workers, twelve of whom pushed papers in the firm's accounting department - a financial controller, two analysts, a chief accountant, a regional chief accountant, two payroll clerks and five bookkeepers. The company's operations in western European countries, with turnovers two to three times higher than here, had just three or four people in their finance departments.

People from the company's headquarters kept pointing fingers at the Polish office, saying that the ratio of "bean counters" to production and sales staff was too high. Yet every visit from the home office to try to streamline the Polish operations' finance department ended in failure. The sight of women toiling often 10 hours a day at desks piled high with vast numbers of invoices, all of which needed to be filed for the monthly returns, proved to the corporate headquarters that without such intensive human effort, the firm would soon run into trouble with the tax authorities. This scenario calls to mind a wonderful Japanese word - muda, literally any activity that does not add value. Poland is full of it.

This is one reason why return on capital invested in the United Kingdom averaged 11.6% in 2002, while in "low labor cost" Poland it was not even half that amount. Investors, however, are wising up to this, as Hungary, the Czech Republic and Slovakia all beat Poland in poll after poll as central Europe's prime investment locations.

And still no one in government gets it.