Five pillars of the program
What is expected to distinguish the Polish Deal from past and proposed economic programs is its focus on several aspects, the improvement of which is assumed to lead to an increase in the living standards of Poles. The pillars in question are:
- Solving the problems plaguing health care;
- Leveling the playing field in the tax system;
- Implementation of changes in the pension system;
- New housing program;
- Investments.
Let’s discuss them one by one.
Polish governance and health care
The changes proposed under the Polish Deal will mainly affect entrepreneurs, who until now have benefited from a flat-rate health contribution, the amount of which is independent of their income. The introduction of the Polish Deal is expected to force businesses to pay a health care premium of 9 percent of their income. This actually means raising the income tax, which was reduced from 18 to 17 percent not too long ago, in October 2019.
The changes proposed by the government aim to bring health care financing to 7 percent of GDP – a target to be reached in 2027.
Polish governance vs. taxes
At the same time, the Polish Deal wants to crack down on the tax issue. There are plans to raise the tax-free amount to 30,000 zlotys. If this change comes into effect, it should be felt by many Poles – because at the moment the free amount is PLN 8,000.
The second tax threshold is also to be raised – it currently stands at PLN 85,000, and under the government’s plans will rise to as much as PLN 120,000 a year.
Important!
The introduction of such wide-ranging changes on the issue of health premiums includes one provision that is not easy to find in government declarations. The talk is that the health premium, under the proposed changes, will not be tax deductible.
Nonetheless, the biggest reform announced regarding the tax system is expected to be the elimination of the so-called “tax system”. “junk” contracts, i.e., commission and work contracts.
Polish governance vs. pensions
The program prepared by parliamentarians also mentions retirees, for whom an income tax-free pension of up to PLN 2,500 gross per month is envisaged. In practice, such a solution would mean up to about PLN 2,000 a year more for each retiree below the threshold indicated above.
The other side of the coin is that higher-earning retirees will be affected by these changes – not least by the fact that they will not be able (like entrepreneurs) to deduct health premiums from their income taxes.
The Polish Deal vs. housing
The now-famous slogan “housing without a downpayment,” which has been repeated in the context of the Polish Deal’s assumptions, is in fact a proposal to enable a bank guarantee of up to PLN 100,000. The aim of this solution is to make it easier to take out mortgages. Another idea of those in power is to pay off part of the property purchase obligations for families raising more than one child.
The second housing project is to allow the erection of houses of up to 70sqm without a building permit, only on notice.
Polish governance vs. investment
The final pillar of the wide-ranging changes is to be investment: according to the ambitious plan, swimming pools, sports fields and other sports facilities will be built, as well as day care centers, museums, new road infrastructure or thermal power plants. Extensive development of digitization was also announced, especially in rural regions.
Summary of the assumptions of the Polish Order
The solutions announced in the spring will not go into effect immediately – the most optimistic estimate is that the changes will be phased in starting in 2022, probably from the second half of the year.
The phased introduction of the changes is expected to include a higher tax-free amount – some sources say it will first be 10, then 15, 20, and only in a few years will we reach the ceiling of 30 thousand zlotys. The coming years will show how the Polish Deal will affect the Polish economy.
