Revamping VAT
The government's reluctance to reform VAT is understandable, given that VAT together with excise tax makes up 60 percent of the state's total revenue. Their joint value in 2004 is expected to top 12 percent of GDP. With the large budget deficit in mind, the Ministry of Finance cannot afford to lose a single złoty from its zł.67.6 billion in VAT revenue. However, analysts argue that a flat rate, even lowered to 19 percent from the present 22 percent base, does not have to mean lower revenues.
A flat rate will inevitably mean an increase on products now taxed at seven percent. The Czech Republic and Slovakia have already transferred to one rate, and recent data shows the price of basic consumer goods went up significantly. This scenario would probably be repeated in Poland.
"Some prices may not fall, while others will definitely go up," says the manager for excise and VAT from PricewaterhouseCoopers (PwC), Tomasz Kassel. Analysts warn that even if entrepreneurs benefit from simpler procedures, there is a chance they could lose out on a decrease in demand caused by the rising prices.
VAT rates in EU countries
base rate lowered rates
Denmark 25%
Germany 16% 7%
Hungary 25% 15% 5%
Luxembourg 15% 12% 6% 3%
Poland 22% 7% 0%
A flat rate will inevitably mean an increase on products now taxed at seven percent. The Czech Republic and Slovakia have already transferred to one rate, and recent data shows the price of basic consumer goods went up significantly. This scenario would probably be repeated in Poland.
"Some prices may not fall, while others will definitely go up," says the manager for excise and VAT from PricewaterhouseCoopers (PwC), Tomasz Kassel. Analysts warn that even if entrepreneurs benefit from simpler procedures, there is a chance they could lose out on a decrease in demand caused by the rising prices.
VAT rates in EU countries
base rate lowered rates
Denmark 25%
Germany 16% 7%
Hungary 25% 15% 5%
Luxembourg 15% 12% 6% 3%
Poland 22% 7% 0%
