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Polish government withdraws proposals for single income tax

Polish MPs back tax

Government plans to merge social insurance contributions with income tax for the self-employed to create a single tax have been cancelled, a decision which has left experts divided.

Currently self-employed individuals can pay a flat 19 percent rate of tax instead of the progressive 18 and 32 percent rates paid by employees, though they must pay some additional contributions.

Prime Minister Beata Szydło announced planned changes in April this year, proposing to merge the 19 percent income tax with both social insurance and health contributions. The changes were expected to be revenue neutral.

However Deputy Prime Minister Mateusz Morawiecki told Polish Radio: “We will not be implementing it in the form which has been proposed. We will now implement no changes at all for the self-employed in 2017.”

Piotr Kuczyński, an analyst from Xelion, said: “I am saddened to hear about the end of these proposed changes… It was an opportunity, for example to make the system more progressive and resolve the issue of tax-free allowances.”

On the other hand, Rafał Antczak from Deloitte welcomed the decision, arguing that the government should be focusing on loopholes in VAT collection instead. He cited estimates that Poland is losing between PLN 40 to PLN 60 billion (EUR 9-13.5 billion) a year in VAT revenue.

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