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Polish tax system improving steadily

Published: 08.12.2015

Poland ranks #58 globally by how complicated its tax system is, up by 29 positions from last year, according to Paying Taxes 2016 report prepared by consultancy PwC and the World Bank Group.

Qatar led this year's ranking, i.e. the country's tax system is the least complicated. Bolivia brought up the rear in 189th spot.

The annual Paying Taxes report compares tax systems of 189 countries worldwide. It also describes measures taken by the tax administration bodies which aim to meet taxpayers' expectations and may stimulate the economy by reducing administrative barriers.

The average Polish entrepreneur makes 7 tax payments over a year, down from 18 in the previous issue of the report. This translates to a time burden of 271 hours a year, better than 286 previously. Poland's total tax rate comes to 40.3%, a notch above 40.1% last time, the report also showed.

Poland looks relatively well against the background of the remaining EU states in terms of the number of annual payments (11.5 average in the case of EU and EFTA) and the total tax rate (EU/EFTA – 40.6%). But by the time needed to comply, Poland does far worse than EU/EFTA, where the average amounts to 173 hours.

EU norms support system quality improvement

Polish tax system has been steadily rising in the ranking since the launch of the report back in 2004, the authors of the document note. This is largely a consequence of Poland's presence in the EU and the need to adapt the tax law to the EU norms. Applying the best practices used in other member states, Poland is slowly cutting the distance between its tax system and those of the Western European countries, making tax issues easier to sort out for entrepreneurs.

The graph shows the changes in the Polish tax system since 2004. Such factors were considered as the total tax rate, time needed to comply with tax-related obligations and the number of tax payments in a year. While the total tax rate changed only slightly, falling to 40.3% from 45% in the period, time needed to comply sank to 271 hours from over 400. The biggest decline came in the number of payments, to only 7 from over 400.

Source: PwC

www.pwc.pl/pl/media/2015/2015-11-19-polski-system-podatkowy-coraz-mniej-skomplikowany.html

The significant progress made in the ranking over the past year should be attributed to, among others, a broad-scale introduction of e-solutions under the e-taxes program.

“The results of this year's study Paying Taxes confirm that the Polish tax system has changed for the better. But we must not forget that there is still a whole lot to be done. For example, one of the challenges is to introduce a single template of the real estate tax declaration or, taking a broader perspective, to change the attitude of the tax administration to the taxpayers to more positive,” PwC law and tax department managing partner Tomasz Baranczyk says.

Solving these issues could not only help Poland move up in the Paying Taxes ranking, but above all give a positive impulse to the development of the Polish entrepreneurship, Baranczyk believes.

Admin tax burdens on the decline

While Poland's tax administration burden is declining, the challenge remains of finding an equilibrium between the tax level and ensuring sufficient revenues to the budget, in the opinion of a World Bank Group director, Augusto Lopez-Claros.

“Poland continues to improve, it has reduced the number of hours a company needs in order to meet its tax obligations from 420 in 2004 to some 270 at present, while also the number of tax payments was significantly lowered, to 7 this year from 49 in 2004,” he said. “So there is a very big progress. The authorities continue the measures aimed at improving the tax administration in the country.”

“I think that the challenge Poland is facing is the same as challenges faced by many other states. In order to fulfill its basic functions, it must have revenues: for investments in security, education, infrastructure, healthcare. At the same time, taxes have a de-motivating influence on the business environment. Hence, one cannot impose too high taxes on businesses as this will lead to a disturbance,” the official believes.

In his opinion, in the past few years Poland did quite well as far as finding such equilibrium is concerned.

“Naturally, one should improve tax administration, fight tax avoidance as both companies and individuals should pay taxes honestly which is a sign of a civilized society,” he commented.

Cabinet priorities among key factors, some tax hikes justified

“The tax level is shaped by many various taxes, not only CIT, but also the taxes on labor, real estate tax, other levies paid by companies. We do not know what net impact it will have on the data, it may change them either way,” Lopez-Claros said.

It is the governments that set the priorities, both for the income and the spending side, the official underlines. A lot depends on what objectives are to be realized.

“Some objectives are linked to income inequality and social justice, and from this perspective, it may be justified to raise the tax burden in some cases, to shift them from one part of the society to another,” in his opinion.

Countries need to watch their expenditures, especially in Europe, where many countries incur high debts and where after the 2008-2009 crisis, debt levels rose significantly – practically across the EU, Lopez-Claros also said.

Source - Polish Press Agency, Economic Service 

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Published by: Justyna Kania
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Last change: 08.12.2015
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