Risky business

Minister of Finance Zyta Gilowska has included in her proposed changes to the PIT, or income-tax system, a plan to limit the possibility for those declaring self-employment to make use of the 19-percent income-tax level. The changes could affect hundreds of thousands of people in Poland, who might have to pay taxes of 30 or 40 percent on their income as early as 2007 if the changes are passed by the Sejm. The plan envisages creating more stringent requirements for declaring self-employment.

Finance Ministry officials insist the changes are only aimed at nabbing tax-dodgers and leveling the playing field for all employers.

"Many taxpayers pretend that they conduct their own business activity. They go into self-employment, but in reality they differ from full-time employees only in that instead of a work contract, they have a contract for rendering services. This cannot continue, because it distorts competition in the labor market," Deputy Minister of Finance Mirosław Barszcz told Puls Biznesu.

Experts agree that existing regulations governing self-employment are hazy, but argue that the current proposal is no better. The new rules require people declaring self-employment to prove that they bear an "economic risk connected with the conducted activities," but what exactly constitutes an "economic risk" is not set out.

"I'm afraid that in the current version the provision is too broad and too unclear. While the taxpayers could claim that they are bearing an economic risk, the tax office could claim that they do not," says Andrzej Taudul, PIT expert for PricewaterhouseCoopers in Poland. "It could cause some big problems and at the moment we don't need more problems, we need clear, specific solutions."