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Monday, October 18, 2021

Polish Order in the Sejm – taxes. PiS: local governments will not lose to the Polish Lada; opposition: it is a carousel of promises

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The Polish Order will not make local governments lose – promised PiS members during the debate in the Sejm. Opposition representatives think otherwise – according to them it is a “carousel of promises”. They warn that local governments will have lower income and investments will slow down.

On Wednesday, the first reading of the government’s bill on support for local government units (LGU) in connection with the Polish Deal Program took place in the Sejm.

Polish order and local governments. Kowalczyk: This is a generous compensation

As deputy finance minister Sebastian Skuza emphasized during Wednesday’s session, solutions under the Polish Deal will translate into the situation of local governments. – It is about greater predictability of revenues of local government units “- he pointed out. That is why, as he emphasized, solutions stabilizing and strengthening the finances of local government units will be introduced. He mentioned, inter alia,” financial support in the implementation of own tasks in the amount of PLN 8 billion this year “.

– The proposed regulations form the legal basis for transferring additional funds to local government units from the state budget in 2021 as a supplement to the general subsidy – he said. He added that it is proposed that the division algorithm should be based on the share of local government units in PIT planned for 2022. He stressed that this split would also take into account the level of wealth of local government units.

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– In the medium four-year period, in some years the budget of local government units could be unbalanced, but it would have to be balanced over the entire four-year period – he indicated. He pointed out that the so-called the correction and equalization mechanism will be based on the current revenues from CIT and PIT, which will result in “a better adjustment of the amount of subsidies and Janosik’s payments to the current financial situation”. He explained that it is also planned to introduce a new, divided in an algorithmic way, part of the general subsidy – “the development part, ensuring constant support for local government units in the investment area”.

Henryk Kowalczyk (PiS), presenting the club’s position to the draft act, pointed out that “it talks about compensation of lost income from PIT and CIT for local government units”. “This is a generous compensation – it has more income than expected,” he said. He indicated, inter alia, a compensatory subsidy and a development subsidy, which, as he noted, “make it possible to precisely define the budget for local governments”.


Will local governments lose due to the Polish Order? “Carousel of Promises”

Jacek Protas (KO) argued that the changes in the Polish Lada were associated with a decrease in the revenues of local government units by a further PLN 12 billion per year. – Proposals to compensate for these deficiencies in the bill are far from sufficient – he stressed. He indicated, inter alia, that they do not increase the share of local governments in PIT and CIT taxes and complicate the system of financing tasks carried out by local governments by introducing new algorithms and subsidies.

Monika Falej (Left) was of a similar opinion, describing the Polish Order as a “carousel of promises”. – The Polish Order is to hit local governments. We will all lose out: there will be less for nurseries, higher ticket prices, cuts in infrastructure expenses – she argued. According to her, the proposed solutions are not an offer for local governments, but a punishment. She announced that the Left would submit amendments to the draft, which would introduce a mechanism thanks to which local government units would do their own thing. – As the left wing, we will work on the further content of the law – she pointed out.

Urszula Nowogórska (Polish Coalition) argued that the proposed changes would result in the loss of local government, among others 1/4 of the current income from PIT, i.e. about PLN 150 billion. – We will present appropriate amendments to this bill – he announced.

– These are ad hoc multi-component solutions instead of simple, stable solutions that local governments need – said Krystian Kamiński (Confederation). In his opinion, local governments will suffer losses in the long run, which will lead to lower living standards for all citizens. – One-off subsidies are far from sufficient, they will not fill the holes in the budgets of local governments – he argued. He stated that the Confederation rejects the solutions proposed by the government, “on which local governments will lose, and thus all of us.”

Michał Gramatyka (Poland 2050) assessed that the Polish Order should strengthen local governments, not weaken them. – There are no such solutions in this project – he said. According to him, the loss of income for local governments will amount to PLN 10 billion annually, and the compensation will amount to PLN 8 billion in the first year. – We will work on the content of the act and propose amendments so that it harms Polish local governments as little as possible – he announced.

Deputy Minister Skuza, responding to the opposition’s accusations that the proposed solutions “are robbing” local governments, indicated that, for example, a development subsidy could be allocated to current expenses.

He said that in the coming years, a development subsidy was to be in force, as part of the general subsidy, in the amount of PLN 3 billion, which would be indexed annually by the GDP growth rate. A rule will also be introduced to stabilize the revenues of local government units, according to which the planned total revenues of local governments from the share in the revenues from PIT and CIT income taxes could not be lower for a given financial year than the revenues made in the year preceding the base year.


The proposed provisions are, on the one hand, to implement the provisions of the Polish Deal Program by introducing, inter alia, a new development subsidy for local governments, on the other hand, are to ensure the adaptation of the local government finance system to the challenges faced by local governments as a result of the implementation of the Polish Deal, especially in the tax system.

The draft assumes the standardization of the method of determining and transferring the revenues of local government units from participation in the revenues from personal income tax (PIT) and corporate income tax (CIT).

The established global amount of local government revenues from PIT and CIT would be based on the revenues from these taxes planned for a given budget year, determined before the beginning of the budget year. MEPs plan to hold a second reading of this draft on Thursday.

Polish order

The Polish Deal is a new socio-economic program for the post-pandemic period. Its foundations are 7 percent. GDP for health; tax reduction for 18 million Poles (including increasing the tax-free amount to PLN 30 thousand and the tax threshold from PLN 85.5 thousand to PLN 120 thousand); investments that will generate 500 thousand. new jobs; apartments without own contribution and house up to 70 sqm. no formalities, and a pension up to PLN 2,500 without tax.

The Sejm referred the bill to the local government and finance committee.

Main photo source: PAP / Albert Zawada

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