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The nationalist-conservative government of Poland has established plans to increase health spending and reduce income tax, as part of a comprehensive program designed to strengthen the economy in the wake of the pandemic.
The so-called Polish agreement, which will include support for home buyers, retirees and families, as well as tax cuts for low- and middle-aged workers, is widely seen as an effort by the Legislative and Justice Party (PiS) to establish its s will stop before the parliamentary elections scheduled for 2023 at the latest.
Like most EU countries, Poland has been devastated by Covid-19, with the pandemic causing more than 70,000 lives and tipping the economy for the first time in three decades.
Prime Minister Mateusz Morawiecki said the Polish agreement, which will be reinforced with loans and grants from the EU recovery fund, was an opportunity to fulfill the dreams of Poles to catch up with the richest countries in the world. ‘Western Europe, as well as expanding the country’s middle class. .
“We have a great opportunity up front,” he said. “[In the past] we always had to worry about freedom from external oppression. But today we may be concerned about the freedom to decide on the rules of economic and social growth in our own Polish sovereign conditions. ”
As part of the changes announced on Saturday, PiS and its two smaller allies plan to increase spending on the underfunded healthcare system, some of which have been overwhelmed by the pandemic, from 5% of GDP in 2020 to 7% 2030.
The tax system will also be modified again. The tax-free income subsidy will rise to 30,000 zlotys and the threshold at which Poles will start paying the highest rate of 32% will go from 85,000 to 120,000 zlotys a year.
Mortgage rules will also be renewed and guarantees will be provided to make it easier for young people to buy property, while building permit rules will be relaxed. There will also be more benefits for families with young children and pensioners, in addition to an investment program that according to PiS would create 500,000 new jobs.
Morawiecki and his fellow speakers at the ruling camp congress gave few details on the financing of the tax cut.
Jaroslaw Gowin, deputy prime minister and head of the Accord, one of the two partners in the PiS junior coalition, acknowledged that richer Poles would have to pay more taxes, but did not go into details. He also said state budgets would be affected.
Polish Finance Minister Tadeusz Koscinski told the FT that tax cuts would be funded in part by faster growth. However, he added that the tax shortfall would also be partially covered by higher social security payments by workers and companies, resulting from changes that would encourage more self-employed workers to full-time employment and employment contracts. removal of a limit on social security payments for self-employed.
Koscinski said that the annual net cost to the state budget of tax cuts would be about 7 billion zlotys. He added that there would be another 3 billion zlotys in grants to co-finance investments by local governments that had lost revenue due to tax changes.
Adam Czerniak, an economist at Polityka Insight, said the government’s assumptions about faster growth that helped cover the cost of government plans were “optimistic, but I think they can happen.”
However, he expressed concern that changes around housing, which include state guarantees on loans for young borrowers, could lead to an overheating of the booming market.
“Guarantees of down payments are very risky at this point in the business cycle in the housing market,” he said.
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