Taxing thoughts
Ewa Gruzinska, who owns a kiosk on Nowy Swiat in Warsaw, is worried by the radical tax reform plan proposed by Finance Minister Leszek Balcerowicz. Although she thinks it's a move in the right direction, she fears that it could adversely affect families like hers.
"I agree that the tax system should be simplified," she said. "But it should not be done at the cost of the hard-working middle class."
For Gruzinska, who runs her kiosk with her husband, this means keeping tax deductions in place. Both housing and private education deductions are important to Gruzinska, whose 16-year-old son attends a private school.
Balcerowicz's plan to eliminate these deductions in favor of a flat, 22% personal income tax rate comes at the wrong time, she said. The family felt like it had finally turned the financial corner and such sudden changes would set them back, she said.
"We planned to build a house," Gruzinska said, "so housing deductions meant a lot to us, as much as reliefs for private education."
Not far away on Nowy Swiat, Jadwiga Myrcha, owner of the Bajka cafeteria, is of a different mind when it comes to tax reform. Myrcha, who has been in business for over 30 years, spends two hours a day keeping her books. So it's no wonder that she's in favor of a plan that would simplify her business.
"You think of taxes all month long," said Myrcha, who has not yet figured out how a flat 22% corporate tax rate would affect her. "One has to remember when to submit personal income tax statements and when to report value-added tax (VAT). And don't forget that there are different VAT rates for alcohol and food.
"Imagine how complicated the system is," she added. "I live in Ochota and my company is registered in Srodmiescie so I have to report to two different tax offices."
Throughout Poland such varying opinions can be found when it comes to Balcerowicz's tax plan.
The proposal calls for the elimination of the current personal tax rates of 19%, 30% and 40%. These would be replaced next year by rates of 32% and 22% and a flat tax in 2000 of 22%. By 2002, corporate tax would be reduced to 22% as well.
Although business groups and politicians have quickly carved out positions, regular taxpayers aren't so sure if they like the plan yet. A constant, though, was that many haven't fully thought through the impact the proposal would have and feel they don't yet have enough information to say "yea" or "nay" to the plan.
"The reform has been presented to the government, not to the public, I haven't seen the White Book of Taxes," said Witold Wojcik, a self-described entrepreneur.
Halina Idzikowska, a former hotel worker who now lives on a zl. 550 a month disability pension, isn't sure how she'll make out under a flat tax. She thinks that she'll have to pay more. While this disturbs her, the uncertainty is equally annoying.
"There is too little information out there," Idzikowska said. "I would like it to be written down in simple terms for the average person who is not an economist so that he can decide if he agrees or not."
For now, all she knows is that her tax rate would increase to 22% from 19%. "I earn zl. 550 a month, I am a rich disabled person," Idzikowska said. "Right now I don't like it because I will pay more."
Others simply don't like the tack the debate over the proposal has taken so far. Piotr Strzembosz, a 35-year-old freelance television screenplay writer who supports the general idea of a linear tax, said the debate so far has been political and not on the merits of the project.
"Neither supporters nor opponents of the idea reveal all the truth about a flat tax," he said. "When (Center for Strategic Studies) Minister (Jerzy) Kropiwnicki says that the poor will pay the same taxes as the well off, I say it's a lie because it will be a proportionally different chunk of their earnings."
He also disagreed with Balcerowicz's assertion that all taxpayers will benefit from the reform, including families that have more than one child, thanks to economic growth. "Remember (growth) does not depend only on the tax system," he said.
And, of course, fears of radical change are also underlined by a general mistrust of politicians.
"If I'm right, now I'm paying 19% and in the future I'll pay 22% and somebody who's paying 43% will pay 32%," said Andrzej Batocki, 43, who retired from the police force at the beginning of July. "Then you can do the math on your own."
The fierce political debate that has consumed the call for a flat tax only reinforced Batocki's belief that the little guy won't come out on top in the end.
"Nothing will change," he said. "Politicians will always be the same, they will always do anything to improve their own situation."
The Finance Ministry is trying to change this impression. Amid accusations that the debate on tax reform is limited to political interests, Deputy Finance Minister Jan Rudowski told a press conference Wednesday that the ministry is running a media campaign about the reform plan and is answering letters from individual taxpayers.
"And it is an open debate," he said.
Not everyone believes that, though. "It will only be the big fish who benefit from the new system," said Wojcik, "the ones who hang around with Balcerowicz."
Family thinking
And even if they don't simply mistrust politicians, many taxpayers aren't quite sure how they'll make out under the changes.
"Right now I'm afraid I will lose too much with the change," Wojcik said.
Such fears are especially true for those with families. Balcerowicz and his Freedom Union (UW) have said a flat tax would help families by spurring economic growth. But UW's coalition partner, Solidarity Election Action (AWS), has argued that tax deductions for families should not be eliminated. The two parties failed again last week to hammer out their differences. AWS continued to say it would be impossible to put the plan into effect next year as called for by UW.
AWS's position has struck a chord with many taxpayers.
Halina Welniarz, who has a 5-month-old grandson, Adam, receives about zl. 600 a month from her pension. Although she is not worried about the plan's impact on herself, she is worried about the elimination of deductions.
"If they want to get rid of the family breaks, that would really hurt my daughter who's bringing up Adam," she said. Welniarz wasn't sure her daughter takes deductions now, but said that "at least if somebody explained to her how to do it she might."
The irony is that while many lower-income taxpayers worry about the elimination of deductions, they wouldn't be the hardest hit. Only 45.7% of the lowest-paid taxpayers have used tax reliefs, while 92.3% of middle-income taxpayers used them, according to the Adam Smith Research Centre, a think tank which supports Balcerowicz's plan.
Even so, many taxpayers voted for AWS because they thought the coalition would follow what it called a "pro-family" platform. Now, these supporters feel let down by its conditioned agreement to the UW plan.
"I haven't calculated (the tax effect), but in a wider context, there were supposed to be pro-family taxes," said Radoslaw Morawski, a 30-year-old who owns a shoe stall in an open-air market in Wroclaw. "How can you have a flat tax system at the same time as a pro-family tax system?"
In addition to being against the elimination of deductions, Morawski believes the flat tax will favor higher-income earners.
"If someone who earns zl. 100 has to pay zl. 30, he's in a completely different situation than someone who earns zl. 10,000," he said. "It's a tax system for the politicians and for big financiers.
"I've been let down by AWS," Morawski added. "I know how these issues can influence what really happens inside a family."
Even some who would make out better under Balcerowicz's proposal, and agree that the system needs to be changed, are suspicious because they trust AWS more.
"It might be a little better, but I am not thoroughly convinced that it's going to be completely good with the proposed project," said Ewa Mielechowicz, an artist/housewife who lives with her husband in Wroclaw. "I have more confidence in AWS than in Unia Wolnosci."
Her husband, Kazimierz, is on a disability pension after working for 36 years in the building industry. The couple's biggest gripe with the system is that low earners like themselves have to pay any taxes.
Kazimierz receives zl. 365.19 a month in disability payments and pays zl. 41.30 in taxes. Under Balcerowicz's plan he'll pay less because the minimum deduction will be increased to zl. 3,000 a year. But it still won't be enough, his wife said.
"Simplifying taxes would probably have a better effect, the only thing is it would be best if taxes were more just so that if people earn less money they would pay less taxes." Ewa Mielechowicz said. "Minimal earnings or disability payments are not enough to meet minimum needs."
Business support
Small business owners, on the other hand, said the pain of losing deductions and undergoing change are worth it if the tax system is easier to deal with. Jacek Kipura, who has owned a computer parts store in Wroclaw since 1992, said the write-offs are too confusing and most people don't even know what they can.
The 30-year-old added that he hasn't yet calculated how the new tax system would affect him. But that doesn't matter.
"Now everybody has to scheme to pay the least amount of taxes," Kipura said. "If there is a flat tax, in my way of thinking and for my conscience that would be OK. It's more just."
He added that he would still back Balcerowicz's plan even if he had to pay more in taxes. "I look at it not from the point of view of an individual like me, I think it would be better for the country," Kipura said. "It would be easier and simpler for society as a whole."
Piotr Godlewski, owner of S.O.S. Funeral Agency which deals with transporting corpses internationally, agreed that Balcerowicz's plan is on the right track. "Right now it's just so complicated," he said. "And even if you do have certain breaks, regular bread eaters rarely plan ahead so they are usually left with way too few receipts at the end of the year."
"I'm just too spontaneous," he said. "If I feel like renovating the flat I just do it and don't think about the tax breaks."
The entrepreneur, who nets an average of zl. 5,000 a month, pays ZUS and personal income tax for himself and his wife. "That's why I don't employ anybody," he said. "It would just be too much of a hassle."
And that's what some taxpayers think about the whole prospect of reform - it's a big hassle.
Jacek Dobosz sits back and worries about doing his job. The 49-year-old sells popular "krowki" candies by the Pulawska Financial Center. "If I make zl. 3,000 that's a good month," Dobosz said. But the retailer doesn't pay income tax. Instead he pays a lump sum of 3.3% based on his total turnover.
Being on a flat tax already, Dobosz doesn't really care what happens next. "The 3.3% is everything I pay, and as far as I'm concerned I don't really think about others," he said.
"I agree that the tax system should be simplified," she said. "But it should not be done at the cost of the hard-working middle class."
For Gruzinska, who runs her kiosk with her husband, this means keeping tax deductions in place. Both housing and private education deductions are important to Gruzinska, whose 16-year-old son attends a private school.
Balcerowicz's plan to eliminate these deductions in favor of a flat, 22% personal income tax rate comes at the wrong time, she said. The family felt like it had finally turned the financial corner and such sudden changes would set them back, she said.
"We planned to build a house," Gruzinska said, "so housing deductions meant a lot to us, as much as reliefs for private education."
Not far away on Nowy Swiat, Jadwiga Myrcha, owner of the Bajka cafeteria, is of a different mind when it comes to tax reform. Myrcha, who has been in business for over 30 years, spends two hours a day keeping her books. So it's no wonder that she's in favor of a plan that would simplify her business.
"You think of taxes all month long," said Myrcha, who has not yet figured out how a flat 22% corporate tax rate would affect her. "One has to remember when to submit personal income tax statements and when to report value-added tax (VAT). And don't forget that there are different VAT rates for alcohol and food.
"Imagine how complicated the system is," she added. "I live in Ochota and my company is registered in Srodmiescie so I have to report to two different tax offices."
Throughout Poland such varying opinions can be found when it comes to Balcerowicz's tax plan.
The proposal calls for the elimination of the current personal tax rates of 19%, 30% and 40%. These would be replaced next year by rates of 32% and 22% and a flat tax in 2000 of 22%. By 2002, corporate tax would be reduced to 22% as well.
Although business groups and politicians have quickly carved out positions, regular taxpayers aren't so sure if they like the plan yet. A constant, though, was that many haven't fully thought through the impact the proposal would have and feel they don't yet have enough information to say "yea" or "nay" to the plan.
"The reform has been presented to the government, not to the public, I haven't seen the White Book of Taxes," said Witold Wojcik, a self-described entrepreneur.
Halina Idzikowska, a former hotel worker who now lives on a zl. 550 a month disability pension, isn't sure how she'll make out under a flat tax. She thinks that she'll have to pay more. While this disturbs her, the uncertainty is equally annoying.
"There is too little information out there," Idzikowska said. "I would like it to be written down in simple terms for the average person who is not an economist so that he can decide if he agrees or not."
For now, all she knows is that her tax rate would increase to 22% from 19%. "I earn zl. 550 a month, I am a rich disabled person," Idzikowska said. "Right now I don't like it because I will pay more."
Others simply don't like the tack the debate over the proposal has taken so far. Piotr Strzembosz, a 35-year-old freelance television screenplay writer who supports the general idea of a linear tax, said the debate so far has been political and not on the merits of the project.
"Neither supporters nor opponents of the idea reveal all the truth about a flat tax," he said. "When (Center for Strategic Studies) Minister (Jerzy) Kropiwnicki says that the poor will pay the same taxes as the well off, I say it's a lie because it will be a proportionally different chunk of their earnings."
He also disagreed with Balcerowicz's assertion that all taxpayers will benefit from the reform, including families that have more than one child, thanks to economic growth. "Remember (growth) does not depend only on the tax system," he said.
And, of course, fears of radical change are also underlined by a general mistrust of politicians.
"If I'm right, now I'm paying 19% and in the future I'll pay 22% and somebody who's paying 43% will pay 32%," said Andrzej Batocki, 43, who retired from the police force at the beginning of July. "Then you can do the math on your own."
The fierce political debate that has consumed the call for a flat tax only reinforced Batocki's belief that the little guy won't come out on top in the end.
"Nothing will change," he said. "Politicians will always be the same, they will always do anything to improve their own situation."
The Finance Ministry is trying to change this impression. Amid accusations that the debate on tax reform is limited to political interests, Deputy Finance Minister Jan Rudowski told a press conference Wednesday that the ministry is running a media campaign about the reform plan and is answering letters from individual taxpayers.
"And it is an open debate," he said.
Not everyone believes that, though. "It will only be the big fish who benefit from the new system," said Wojcik, "the ones who hang around with Balcerowicz."
Family thinking
And even if they don't simply mistrust politicians, many taxpayers aren't quite sure how they'll make out under the changes.
"Right now I'm afraid I will lose too much with the change," Wojcik said.
Such fears are especially true for those with families. Balcerowicz and his Freedom Union (UW) have said a flat tax would help families by spurring economic growth. But UW's coalition partner, Solidarity Election Action (AWS), has argued that tax deductions for families should not be eliminated. The two parties failed again last week to hammer out their differences. AWS continued to say it would be impossible to put the plan into effect next year as called for by UW.
AWS's position has struck a chord with many taxpayers.
Halina Welniarz, who has a 5-month-old grandson, Adam, receives about zl. 600 a month from her pension. Although she is not worried about the plan's impact on herself, she is worried about the elimination of deductions.
"If they want to get rid of the family breaks, that would really hurt my daughter who's bringing up Adam," she said. Welniarz wasn't sure her daughter takes deductions now, but said that "at least if somebody explained to her how to do it she might."
The irony is that while many lower-income taxpayers worry about the elimination of deductions, they wouldn't be the hardest hit. Only 45.7% of the lowest-paid taxpayers have used tax reliefs, while 92.3% of middle-income taxpayers used them, according to the Adam Smith Research Centre, a think tank which supports Balcerowicz's plan.
Even so, many taxpayers voted for AWS because they thought the coalition would follow what it called a "pro-family" platform. Now, these supporters feel let down by its conditioned agreement to the UW plan.
"I haven't calculated (the tax effect), but in a wider context, there were supposed to be pro-family taxes," said Radoslaw Morawski, a 30-year-old who owns a shoe stall in an open-air market in Wroclaw. "How can you have a flat tax system at the same time as a pro-family tax system?"
In addition to being against the elimination of deductions, Morawski believes the flat tax will favor higher-income earners.
"If someone who earns zl. 100 has to pay zl. 30, he's in a completely different situation than someone who earns zl. 10,000," he said. "It's a tax system for the politicians and for big financiers.
"I've been let down by AWS," Morawski added. "I know how these issues can influence what really happens inside a family."
Even some who would make out better under Balcerowicz's proposal, and agree that the system needs to be changed, are suspicious because they trust AWS more.
"It might be a little better, but I am not thoroughly convinced that it's going to be completely good with the proposed project," said Ewa Mielechowicz, an artist/housewife who lives with her husband in Wroclaw. "I have more confidence in AWS than in Unia Wolnosci."
Her husband, Kazimierz, is on a disability pension after working for 36 years in the building industry. The couple's biggest gripe with the system is that low earners like themselves have to pay any taxes.
Kazimierz receives zl. 365.19 a month in disability payments and pays zl. 41.30 in taxes. Under Balcerowicz's plan he'll pay less because the minimum deduction will be increased to zl. 3,000 a year. But it still won't be enough, his wife said.
"Simplifying taxes would probably have a better effect, the only thing is it would be best if taxes were more just so that if people earn less money they would pay less taxes." Ewa Mielechowicz said. "Minimal earnings or disability payments are not enough to meet minimum needs."
Business support
Small business owners, on the other hand, said the pain of losing deductions and undergoing change are worth it if the tax system is easier to deal with. Jacek Kipura, who has owned a computer parts store in Wroclaw since 1992, said the write-offs are too confusing and most people don't even know what they can.
The 30-year-old added that he hasn't yet calculated how the new tax system would affect him. But that doesn't matter.
"Now everybody has to scheme to pay the least amount of taxes," Kipura said. "If there is a flat tax, in my way of thinking and for my conscience that would be OK. It's more just."
He added that he would still back Balcerowicz's plan even if he had to pay more in taxes. "I look at it not from the point of view of an individual like me, I think it would be better for the country," Kipura said. "It would be easier and simpler for society as a whole."
Piotr Godlewski, owner of S.O.S. Funeral Agency which deals with transporting corpses internationally, agreed that Balcerowicz's plan is on the right track. "Right now it's just so complicated," he said. "And even if you do have certain breaks, regular bread eaters rarely plan ahead so they are usually left with way too few receipts at the end of the year."
"I'm just too spontaneous," he said. "If I feel like renovating the flat I just do it and don't think about the tax breaks."
The entrepreneur, who nets an average of zl. 5,000 a month, pays ZUS and personal income tax for himself and his wife. "That's why I don't employ anybody," he said. "It would just be too much of a hassle."
And that's what some taxpayers think about the whole prospect of reform - it's a big hassle.
Jacek Dobosz sits back and worries about doing his job. The 49-year-old sells popular "krowki" candies by the Pulawska Financial Center. "If I make zl. 3,000 that's a good month," Dobosz said. But the retailer doesn't pay income tax. Instead he pays a lump sum of 3.3% based on his total turnover.
Being on a flat tax already, Dobosz doesn't really care what happens next. "The 3.3% is everything I pay, and as far as I'm concerned I don't really think about others," he said.
