Changes in PIT are greater gains. Here are the details of the Government's proposal – Business


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Not all young people will be exempt from personal income tax, but the costs of earning an income will increase significantly. All those who work full time and receive a minimum wage will earn PLN 472 per year. In the case of the national average, it will be approximately 696 PLN.

All those who work full time and receive a minimum wage will earn PLN 472 per year / © 123RF / PICSEL

Cons can not obscure the pros

The Ministry of Finance Tuesday presented details of changes in taxes, which were announced in the five of Kaczyński. They refer to the exemption from personal income tax for persons under 26 years of age, increase of tax deductible costs and reduction of the rate to 17%. The main direction has been preserved, but there are surprises in specific solutions. For example, a zero rate for young people and 17%. The PIT applies only to income of not more than PLN 42 762 per year. This means that the department is only introducing a new income limit.

These plans were not well evaluated by economists. They argue that with a salary of 2,500 PLN gross, it will still be profitable to employ young people in the garbage because the benefit of the lack of premiums from the contract order is greater than the lack of advance tax on the labor contract. In turn, 17 percent. experts consider a good rate, but only the first, small step to reduce the tax burden.

Positive reviews, however, pick up the idea of ​​raising revenue costs. By default, it will be PLN 3,000 per year, instead of the current PLN 1,335. What does this mean in practice?

The employee receiving the minimum wage will earn about PLN 472 per year, while the person who earns the national average – approximately PLN 696. The advantage for young people (covered by 0% of the personal income tax) is 1592 PLN for the minimum wage. In PLN 3,563 (maximum to use zero rate), will be PLN 2,986.

– The winners who earn the minimum will have around 40 PLN more per month and the average winner – PLN 60. Then the first will be the most proportional. And that's what it's all about – says Jakub Sawulski, an economist at the Institute for Structural Research. It also draws attention to the fact that a rather complicated way to increase fiscal progression has been chosen. Because instead of packing another IRPF rate with an additional limit, it was better to boldly increase the costs of monetization. – It seems that the Finance Ministry has tried to reconcile its own objective, which is the low taxation of low wages, with political promises to reduce rates – he comments.

Zero PIT and 17 percent the rate does not arouse the enthusiasm of economists. As a solution in which the less fortunate benefit more, it is better to evaluate the increase in deductible costs.

Youth without taxes

The Ministry of Finance proposes a zero PIT rate for people under 26, but not all young people will benefit. The zero tax will be valid for yields not exceeding PLN 42,764 per year. The Ministry of Finance also clearly emphasizes that the tax exemption does not mean exemption from contributions to ZUS and NFZ.

The solution is to take effect as of October 1 of this year, that is, it will work in the fourth quarter, so the income limit for this year, in which the zero rate can be used, is almost 10.7 thousand . PLN, or a quarter of the annual income limit. However, in order to not complicate the lives of employers who would have to adapt their accounting systems in the run, the tax advance will still be levied. The tax office will return it next year.

Is it really worth it? The Ministry of Finance presents calculations showing that at minimum salaries (gross PLN 2250 per month), the annual profit is PLN 1592 and with a salary of PLN 3,563 – the maximum to benefit from the 0% rate. – the annual benefit is PLN 2 296.

With minimum earnings, the benefit of a zero PIT rate is 1592 PLN per year.

The PIT for young people is expected to cost about PLN 1,3 billion during the year, with the exception of 2020, when due to the return of overpaid advances, the cost will amount to PLN 1.7 billion.

Economists generally praise the ultimate way to exempt young people from taxes. Michał Myck, director of the Center for Economic Analysis at CenEA, believes that the new variant with the limitation of the first, new threshold is more cautious and actually focuses only on low-income young people, often those entering the job. – It can serve as an incentive to resume and legalize employment. Restricting preferences will reduce the costs of these new solutions – says Myck.

Is it a strong stimulus? Łukasz Kozłowski, an economist at the Federation of Polish Businessmen, estimates that at a salary of 2,500 zlotys, it will still be profitable to employ young people in garbage trucks. Because the benefit of the lack of contributions from the contract order is greater than as a result of the lack of advance tax on the employment contract. In the first case, the payment of the salary will be PLN 2206, in the second PLN 1,957.

PIT reduction to 17%

The second key tax proposal of the five of Kaczyński was the reduction of the IRPF rate from 18 to 17%. Since yesterday we know that this will not be a reduction, but the introduction of a new yield limit of 17%. game. The ceiling will be PLN 42,764 per year and the cost for public finances will be PLN 5.3 to 5.5 billion per year. The Finance Ministry says it has decided to take such a step to encourage people working in the gray area to legalize employment.

– This solution is to give benefits of reducing the PIT to those who earn less and to the average – explained Filip Świtała, Deputy Minister of Finance, yesterday. The new rate should be applied to the employment relationship, personal activities, business activities of individuals, pensions and property rights. The annual benefits for people with minimum wages are 472 PLN and those who earn an average of 696 PLN.

Experts prefer to accept this idea without enthusiasm. Jakub Sawulski, an economist at the Institute for Structural Research, believes that this is a very small scale to really talk about getting people out of the gray economy. Although he agrees with the thesis presented by Finance Minister Teresa Czerwińska that this is the first step to reduce the tax burden, especially for the less paid people.

– The steering is good, but I would not count on a significant reduction of the gray area. The tax quota for the minimum wage will fall, but not much, maybe instead of 40%, with contributions, will be 38-37%. It's not such a big scale that employment in civil law contracts or under-table pay cease to be profitable, "says Jakub Sawulski. Michał Myck speaks in a similar way. In his view, reducing the rate to 17 percent. it will not encourage legal employment.

– Introducing a minor, 17 percent lower rates of income can be picked up as a gesture for taxpayers who do not benefit from the increase in their deductible costs, and at the same time did not significantly feel the previous changes. For example, retirees and pensioners who do not work – says the economist. And he adds that raising revenue costs is a much better way to lower the wedge.

The cost of almost triple

Initially, costs were doubled. Finally, the Ministry of Finance decided to triple them. For example, a person working full time may deduct PLN 3,000 from BUY, compared to PLN 1,335 at the time. – If the actual scale of your increase is 200%, for many contributors it will be a remarkable change – estimates Michał Myck.

This solution raises the slightest controversy. Not only is it more effective from the point of view of the goal, it was to reduce the burden on lower wages because the lower would gain proportionately. But it also does not complicate the tax system, as well as the introduction of new rates and limits. In the list of expenses that will have to be incurred in connection with the tax reform, the higher BUY is not the biggest burden. The Ministry of Finance estimates that the increase in acquisition costs means a loss of income of PLN 3,4 billion per year.

Higher costs, such as the new limit of 17%. rate will be applied from the new year. The project, which is to present all the solutions simultaneously, will be ready in two weeks.

Marek Chądzyński, Grzegorz Osiecki and Bartek Godusławski

April 16, 2019

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