OVERVIEW

  • Fiscal responsibility is a key policy goal, but austerity isn’t the only way to achieve it. (Scandinavian Journal of Public Health)

  • Poland has so far avoided austerity policies comparable to those conducted by other European countries, and also has considerable room for further fiscal expansion. (Friedrich Ebert Siftung)

  • Since 2015, Poland’s government has both strengthened the nation’s fiscal position and improved tax collection. (Wall Street Journal)

    • Part of this can be attributed to the crackdown on tax fraud and evasion, which ended up increasing revenue from the Value-Added Tax (VAT) by 26%, and prosecuting transnational gangs and corrupt officials.

    • The Law and Justice party also introduced a tax regime that provides special incentives, especially for small and medium-sized firms, for investment and research development.

  • Poland’s economic model has fused competitiveness, entrepreneurship, innovation, and “solidarism,” or responsibility for the community at large. (Institute for Market, Consumption, and Business Cycles Research)


THE THIRD WAY ON TAXES: SHERLOCK HOLMES IS BETTER THAN ROBIN HOOD

  • Poland’s implementation of the Strategy for Responsible Growth shows that it is possible to cut taxes, increase fiscal transfers to improve the safety net, and reduce the budget deficit at the same time. (World Bank)

  • Prime Minister Morawiecki has said that “we want to be more like Sherlock Holmes than Robin Hood,” (Eutopya) -- Instead of increasing public revenue by raising tax levels, Poland increases it by focusing on enforcing collection of the taxes that already exist and hunting down tax fraud. (ThefirstNews)

    • Between 2007 and 2015, Poland lost $64 billion to VAT fraud, nearly a full year of national tax revenue, (Poland In) which demonstrates the lost revenue when policy does not focus on enforcing tax collection.

  • The VAT tax is the country’s biggest source of revenue, accounting for around 40% of its budget, so the current government established a National Revenue Administration to crack down on VAT fraud. (ThefirstNews)

  • Some of the ways in which Poland is tackling fraud and the VAT collection gap include the introduction of a split payment mechanism and the SAF-T (Standard Audit File-Tax) Reporting System. The National Revenue Administration (KAS) also cooperates closely with the Police’s Central Bureau of Investigation, the Polish Border Guard, International Security Agency (ABW), and the Central Anti-Corruption Bureau (CBA) to track down and arrest organizers of VAT carousel frauds. (Polish Economic Institute)
     

    • From 2016 to 2018, the VAT gap in Poland shrank from $9.63 billion to 43.60 billion. (Poland In)

    •  Poland has drastically reduced its VAT gap from 24% in 2015 to 7-12% of potential revenue in 2018 (depending on the source of the estimate). Poland currently has a lower VAT gap than the EU average of 12.3%. (World Bank)

  • As a result of the additional revenue from improved tax collection, Poland’s government has been able to finance its flagship project of providing benefits of 500+ PLN / month per child (approximately $147) for families with 2+ children. As a result, Poland has significantly decreased child poverty in Poland in just two years. (The program is not designed for single parent household).
     

  • Poland’s government is challenging fraud and corruption generally. The fight against illegal fuel trade (unrecorded, untaxed transactions) has resulted in the increased consumption of legally purchased fuels and, consequently, both higher tax revenues and improved energy sector results. In the first three quarters of 2017, Polish fuel consumption was 12% higher than during the same period in 2016. This has helped energy companies (such as Orlen) achieve historic sales and spend more money on R&D in electromobility. (Reuters)