The age of the libertines
Civic Platform's and Law and Justice's economic programs both offer what have been labeled 'liberal' solutions, but for many of the potential coalition's policies, that is where the similarity ends. At the same time, many entrepreneurs and captains of industry are full of enthusiasm for the future government, with the prospect of long-overdue reforms now an economic reality. The WBJ talks to the country's top businesspeople to find out what they expect from Poland's new leaders and what they want to see on the fresh political agenda.
After years of socialism implemented by the post-solidarity AWS (Solidarity Electoral Action) government and post-communist SLD (Democratic Left Alliance) the time has come for liberals to take over the reins of the country's economy.
The Civic Platform (PO) and Law and Justice (PiS) are all for lower taxes and an entrepreneur-friendly business environment. All in all, both parties to the future coalition agree the situation in Poland should be getting better instead of worse. Pre-electoral promises sound sweet, but as PiS presidential candidate Lech Kaczyński said during his speech in the Batory Foundation last week: "You never eat your meal at the same temperature you prepare it."
So, after the electoral fever cools down and the new Ministers have picked the wallpaper for their new offices, what will become of the campaign postulates? Which of them actually stand a chance of being implemented and to what extent will the two 'liberal' political formations cooperate?
Taxing times
"From the entrepreneur's point of view, the three most important problems to address are: first, red tape limiting the freedom of economic activity; second, a labor code that cannot treat hypermarkets and a kiosk managed by an average guy in the same way; and third, fiscal and social-security regulations. Labor in Poland is as heavily taxed as alcohol and that's why the unemployment rate is so high. It is far too expensive," says Robert Gwiazdowski, president of the Adam Smith Center, an independent economic think tank.
According to PO's leader, Jan Rokita, apart from the main taxes such as PIT, CIT and VAT, there exist in Poland some 57 quasi-taxes the majority of which should be scrapped. "PO's idea to simplify the tax system in Poland is a consistent project - the reforms are well prepared and ready to be realized. The removal of inheritance, agricultural and forestry tax as well as the reduction of the TV license fee all aim at decreasing the state's intervention in the individual's finances," says Rafał Antczak, PO's economic advisor.
"A liberal experiment," retorts Lech Kaczyński. He is strongly against the 3x15 percent flat-tax rate and removing all tax exemptions. According to PiS, such a solution would be very disadvantageous to the poorest people.
Keeping up with the neighbors
BMW Polska CEO Erich Papke thinks more along the lines of PO economists. "Because of the difference in VAT as well as excise tax between Poland and Germany a lot of purchases are taking place in Germany that should be taking place in Poland. It means that when investing entrepreneurs don't get the type of return on their investment they would expect and, secondly, the Polish government doesn't get the tax income. If you take any white goods, semi-durable goods or durable goods then the difference between 16 percent in Germany and 22 percent in Poland makes it worthwhile for anyone to go and buy a refrigerator, a TV set, a car or anything of that nature in Germany rather than buy it here."
The VAT discrepancy is also giving the alcohol industry a headache. "Excise on beer should be lowered to come in line with neighboring countries. Germany and Czech have half our excise burden, and illegal imports are growing," says Karl Lippert, CEO of Kompania Piwowarska.
Papke and Lippert are not the only ones complaining about tax differences impeding the growth of businesses in Poland and decreasing their competitiveness. Many other entrepreneurs underline that with Poland being part of the EU, at least consumption taxes should be limited. Otherwise, Polish customers will go and buy across the border.
Creating new jobs
When it comes to fighting the staggering unemployment rate, PO and PiS' ideas differ. "I don't believe changing the Labor Code to be more favorable for employers will automatically translate into more investments," says Lech Kaczyński. "The entrepreneurs should be exempt for a two-year period from paying social security contributions as well as get a zł.1,000 rebate on CIT each time they create a new job. We would also like to introduce more profitable depreciation-related regulations."
Gwiazdowski is far from enthusiastic. "The two-year exemption from ZUS is not PiS' idea, it is [former] Prime Minister [Jerzy] Hausner's. He advocated exactly the same solution and this is a totally idiotic idea. One can't create temporary exemptions - today we'll activate you and in two years time we'll get even. In general, the burden level on labor is too high. It doesn't matter if the exemptions will be valid for two years or not because in two years' time we'll have exactly the same problem. We need a system solution and not just a face-lift."
According to Karl Lippert the burden on revenue generators should be reduced through structural reforms of the social security system, which would allow employers to limit their liabilities. The labor legislation also needs an overhaul to make the market more flexible and employer-friendly.
The troublesome trials of transportation
Yet another recurring issue to be tackled by the new government is the infrastructure, and not just in terms of roads. Poland's location, particularly its coastline, is a great asset but it is not properly used.
"Warsaw airport is one of the most expensive airports in Europe. Running a business in Poland would be much easier if the conditions were more favorable for all airlines. Warsaw could become the prime hub for Central and Eastern Europe - people going from Riga to Bucharest would transfer in Warsaw - not Prague or Budapest. Today it is something of the future but in five to 10 years it will be a big market. Our experience shows that it only works when the airport authorities, the local airlines and the local government all pull in the same direction," says Thorsten Bohg, CEO of Lufthansa Polska.
Monetary dilemmas
However, politicians seem preoccupied with controversial pet projects rather than the concerns of entrepreneurs. A case in point is PiS' proposal to scrap the Monetary Policy Council (RRP), a 10-member body that is made up of the national bank's governor and nine members appointed by the president, the lower and the upper houses of parliament. The body is responsible, among others, for setting the level of interest rates. Instead, PiS wants to "harmonize" monetary policy with the government's attempts at creating new jobs and fostering economic growth.
PO, on the contrary, insists on the Central Bank's independence and is looking forward to handing over Poland's monetary policy to the European Central Bank with the adoption of the euro as soon as possible, an idea opposed by PiS, which is in favor of entering the eurozone at a slow, gentle but "responsible" pace.
Even though PO and PiS claim they are both liberal, having a closer look at the details of their respective economic programs reveals numerous differences. Which of the parties' ideas after they form a PO/PiS coalition will be carried out and to what result is still quite a mystery. In Polish the word "popis" means a show-off, and the least we can expect from a PO/PIS coalition is an interesting political spectacle. Whether the show is to entrepreneurs' taste remains to be seen.
