Seeing red

That is how many taxpayers might have responded to the latest government wheeze for increasing taxation. The government announced last week that it is planning a tax amnesty for undeclared incomes. In fact, something far more sinister is being planned. The government's plan is to introduce a tax amnesty for all those who will pay a 7.5% tax legalizing their undeclared incomes. To encourage people to own up and cough up, the government is introducing a compulsory register of assets in which all income taxpayers each year will have to declare what (property, cars and items worth more than a certain value) they own. This idea is modeled on Italian tax amnesties, which have apparently been a regular feature of Italian life for the past couple of decades. The idea is that since Poland has copied the Italians in the corruptibility of public officials and organized crime, we might as well copy their tax system. It's just a pity that we cannot so easily copy their climate and entire culture. But Finance Minister Grzegorz Kołodko is no doubt working on that one.

The reason for the move is obvious. The government is desperately looking for extra sources of money to keep the budget deficit in check. It does not want to put up direct or indirect taxes because that would be unpopular with everyone. It does not want to reduce tax rates because its left wing would rebel at "letting the rich get richer." Arguments that reduced taxes would help create more wealth and thereby generate more taxation (documented by evidence from a large number of countries) do not cut much ice with the likes of the trade unionists of the pro-Democratic Left Alliance (SLD) OPZZ union or with Self-Defense party leader Andrzej Lepper's shock troops. The so-called amnesty is a thinly veiled attempt to make people volunteer to pay more tax. The message the government is sending is this: Pay the 7.5% tax on a reasonable sum, and we will leave you alone. There is, of course, the other side of this message: Fail to pay the 7.5%, and we will challenge every little detail we can in your declaration of assets and make your life miserable.

Indeed, very few people will choose to argue their case with the tax offices that they have saved for the things they have or inherited from family. Instead, they will cough up some money, fearing that a 75% tax penalty decision would cripple them financially for years, even if eventually they found satisfaction in the courts. (In Poland, you have to pay the tax first before going to court. If you don't, the tax office automatically seizes your assets through the bailiff and/or freezes your bank accounts). In battles with individual citizens, the tax office always holds the whip hand.

Politically, this is a far easier operation than the considered - but for the time being - suspended move against state agencies and funds. The reform of state agencies and funds would, of course, yield far more income over the years, but politically is difficult since it affects the interests of both the government coalition partners. What does all this mean politically? For the SLD, it is a reasonably smart move. First of all, it satisfies the public's thirst for "dealing with the rich" and their ill-gotten gains. Second, and in the long term far more important, it further opens the way for a dialogue with both the activists and the voters of Lepper's party. It is Lepper's party that has repeatedly called for the "financial verification" of the wealthy. It is Lepper's party with which the SLD may have to ally to control many regional and country local governments up and down the land after the local elections, which will be held on Oct. 27. The cozy parliamentary relationship, which has helped the SLD to reduce the influence of its official coalition partner the Polish Peasants party (PSL) could well spread into local government.

This whole episode is a useful reminder to all interested parties that this is no modernizing Tony Blair-style social democratic government. It is a government of the left. It wants to increase public expenditure. It will strive to increase taxes for the rich. It is bound to be suspicious of privatization, which takes the levers of control out of its hands in what it considers to be the "commanding heights" of the economy. It will forgive the debts of state enterprises and seek to squeeze more both the private sector and individual taxpayers. Its instincts will remain interventionist and egalitarian. The red tiger has not changed its spots. It merely wears better suits and goes on trips to Brussels.

Chris Mularczyk is a Warsaw-based consultant. He can be mailed at cmularczyk@wbj.pl.