The Morawiecki Plan Promises a Brighter Future for Poland

.

Nicholas Richardson

About Nicholas Richardson

Nicholas Richardson is a Partner at Richardson & Wspólnicy and vice-Chairman at British-Polish Chamber of Commerce. He has been working in Poland for the last 16 years. Prior to establishing his own law firm in 2004, Nicholas was a partner with Norton Rose. Nicholas has served as non-executive chairman of two public companies traded on the AIM market of the London Stock Exchange, and also served on the boards of a number of companies in Poland, the United Kingdom and the Netherlands. Nicholas is member of The Law Society of England and Wales, is a registered foreign lawyer at the Polish Bar of Legal advisers and is a member of The Institute of Directors in London.

“Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it.” The words of US President Ronald Reagan are still a useful shorthand to understanding government’s approach to the economy, even after the economic changes of the last thirty years.

In Poland, as an aside, they also serve as a useful template for ministerial drivers, if recent events are anything to go by (fortunately no-one suffered life-threatening injuries): if it moves, accelerate; if it still moves, crash; and if it stops moving, blame somebody or something else. But, I digress. On 14 February, the government adopted a fiscal plan – known as the Morawiecki Plan, named after Mateusz Morawiecki, the deputy PM and finance and development minister – which will set out a roadmap for Poland’s economy until 2020, including an outlook for the next ten years.

The plan assumes that per capita income in Poland will reach 80 per cent of the EU average, compared with 69 per cent in 2015. The plan states that labour market reform and demographic improvement is needed and envisages the employment rate for 20 to 64 year-olds rising from 67.8 per cent to 71 per cent by 2020. The plan also envisages an increase in investment, a greater role in international trade and more investment by Polish companies abroad. How realistic is this?

Current economic performance is still good with GDP growing at 2.7 per cent in the final quarter of 2016. While this is better than the 2.5 per cent that was predicted, it appears to be slowing. At the end of January 2017, the central statistics’ office made a preliminary estimate, putting GDP growth for 2016 at 2.8 per cent compared to 3.9 per cent in 2015.

Some analysts expect faster growth lies ahead as a result of increased investment, although the European Commission revised its projections downwards, on 13 February, predicting 3.2 per cent growth in 2017, down on November’s prediction of 3.4 per cent. The Commission had previously forecast growth for 2016 at 3.1 percent and said the lower than expected growth was caused by an estimated 5.5 per cent contraction in investment in 2016. It attributed this “to the slow progress of projects financed by EU structural funds under the new programming period and increased policy and regulatory uncertainty.”

The Commission added that public investment is expected to rebound strongly in 2017 and 2018 as EU funds are put to use. “Private investment is projected to recover gradually, helped by a solid domestic demand and an outlook for further export growth.”

The Polish Finance Ministry pointed out that according to Commission forecasts, Poland will be among the six fastest growing EU member states. Earlier this month Mr Morawiecki said that the economy would grow 3 per cent this year, which is just as well, as the 2017 budget is based on growth at 3.6 per cent.

Additionally, while Poland’s budget deficit fell to 2.3 per cent of GDP in 2016 (the lowest since 2007) the European Commission forecasts it will rise to 2.9 per cent in 2017 and 3 per cent in 2018. This improvement on earlier estimates for 2016, was “mainly driven by a drop in public investment and one-off revenue, while tax collection was in line with budget plans”; while the forecast increase for 2017 was caused by the “increasing costs of the lowering of the statutory retirement age,” the Commission wrote.

The government announcing the adoption of the Morawiecki Plan — Jerzy Kwieciński, Secretary of State, Ministry of Economic Development; Piotr Gliński, Deputy Prime Minister and Minister of Culture and National Heritage; Mateusz Morawiecki, Deputy Prime Minister and Minister of Economic Development and Finance (from left to right, source kprm.gov.pl)

All of which means that the finance ministry will need every zloty it can find, especially when programmes such as the 500+ — recently hailed by the president as a great success – need to be financed. For this reason, the finance minister’s announced, on Friday, that the ministry will start investigating “the transfer abroad of profits on which tax was not paid in this country”. This is part of a general effort to improve the efficiency of tax collection, which is to be commended, although it is not clear how the supposed outflow of funds is to be taxed.

The EU parent subsidiary directive and the treaties on the avoidance of double taxation would seem to tie the ministry’s hands, so expect a greater focus on tax inspection for international companies in order to focus on payments to foreign parents for their share of head office costs and other support. Woe betide those who do not have clear transfer pricing documentation and robust service agreements in place.

Ultimately, the undue harassment of international companies, along with the dear leader’s suggestion about the correct role of business vis á vis the state, is likely to prove counter-productive, but one should not discount the need for statements to assuage the domestic audience, while saner counsel prevails behind the scenes.

_______________

The views expressed in this opinion editorial are the author’s own and do not necessarily reflect Emerging Europe’s editorial policy.

RELATED ARTICLES

A Positive and Modern View of Entrepreneurship

Poland’s Capital Saturation Lower Than the Czech Republic’s

deloitte fdi poland

Outsourcing in Germany: Stop Talking at and Start Talking to

Is there any prospect of ‘Polexit’?

poland european union polexit

Poland’s Drift Away From Democracy

Ukraine’s Reputation for Cheap Labour May Not Ring True in the Long-term

Business Moving Forward with Cautious Optimism — Can Investors Win the Confidence Game?

Czech Republic Renaming Has Real Economic Costs

European Volatility Makes Economic Development Slower for Ukraine

Europe at Odds over OPAL and Nord Stream 2

Ex-Transition Economies’ FDI Recovery

dollar euro fdi

Hungary’s Nationalist Assault on Free Enquiry

victor orban ceu

Belarusian Journalists Still Face Huge Problems

LGBT in CEE — A New Acceptance Is Being Born From Migration

Old Fashioned Skulduggery Overshadows the Elections in Moldova

Fiscal Policy Predictability in CEE — It’s Time for Change

A Bosnian Referendum Shows Russia’s Influence in the Balkans—As Well As Its Limits

Regional Relations in the Western Balkans: Moving Beyond Folklore

Bosnia and Herzegovina flag with Serbia flag, 3D rendering

Defending EU Values in Poland and Hungary

Eu hungary poland

A New Division Between Eastern And Western Europe?

Are There Differences Between How Tax Regulations in Poland and IAS Treat Intangible Assets?

Albania’s Election Apathy

tirana albania

Breaking With Imitations of the Past

The Right to Water: Who Can Change Today’s Situation?

Poland Needs to Cling to the Eurozone

zloty euro emerging europe

China: A Giant That Is Hard to Crack

Moldova Falls Victim to Politicising

moldova emerging europe

Changing Perspectives and Showing That True Romania is a Vibrant Innovative Country

Measuring Growth of Societies with GDP Alone Shows an Incomplete Picture

The Netherlands’ Objection to the Ukraine-EU Association Agreement could be Costly to Europe

Big Fish, Small Fish, Where to Fish? On the Eve of the Fourth Industrial Revolution

EU-CEE Is Still Growing at a Healthy Rate

Prague emerging europe

Prepare for a New Europe

The Capital Markets Union: a New Beginning in the European Financial Sector?

Poland’s Unicorn, Slovakia’s Flying Car and the Future of Europe

Swimpassing Dniester Without Prejudice To Democracy

Parliament of the republic of moldova in chisinau, national flag, stefan cel mare street, spring time with blue sky

Falling into Old Ways in 2017? Ukraine’s Struggle for Functioning Economic Institutions

Romania Surviving the Waves of Recent Political Tsunamis in Europe

International Women’s Day — Let’s Take Action And Then Celebrate

Will Poland Leave the European Union?

polexit

Is the CEE Region About to Steal the Outsourcing Crown From India?

Amazing view on the Taj Mahal in sunset light with reflection in water. The Taj Mahal is an ivory-white marble mausoleum on the south bank of the Yamuna river. Agra Uttar Pradesh India.

Brexit: Let’s Learn the Lesson and Hope a Better Europe Will Arise

After 25 Years of Restructuring, the Romanian Power Sector Is at a Crossroad

Slovenia’s Presidential Election: Pahor Expected to Romp Home

Slovenia flag against blue sky waving in wind

Good Match But Unlikely Marriage

How strong is V4?

Viktor Orban

Under Promise, Over Deliver: Prospects for the EU’s Eastern Partnership in 2018

Eastern partnership

PiS Uses Media Control to Bring Poland to Heel

Jaroslaw kaczynski pis emerging europe

The Voice of European Business Must Be Heard Loud and Clear by Brexit Negotiators

United or Divided? Europe in the Face of the Challenges of Tomorrow

Macedonia’s Controversial Coalition Government

SKOPJE MACEDONIA emerging europe

The CEE Region Is Making Advances in Prioritising Waste-to-Energy Projects

Impact of Brexit on EU-CEE Not Overstated

theresa may brexit

Nagorno-Karabakh Conflict Moves from Frozen to Kinetic

Nagorno-Karabakh

When Neutrality Isn’t an Option

President of the Russian Federation Vladimir Putin

Are Labour Shortages Driving Economic Growth?

Azerbaijan: The Rich Get Richer and the Poor Get Nothing

Baku

Will a Two-speed European Union Side-line the Visegrad Four?

Global Expansion in the Digital Age

2018 Elections — Vital Decisions for Hungary’s Future

Victor Orban energing europe

CEE-Benefits and Disadvantages of Joining the Eurozone

forint zloty euro

The Competitive Edge in Central and Eastern Europe

SOFIA BULGARIA - MAY 5: View of the Ivan Vazov National Theatre in Sofia on May 5 2016. Sofia is the largest city and capital of Bulgaria.

Not All Quiet on the Eastern Front

The Sharing Economy Could Bring New Business Models to CEE

Belarus 2020: Turning the Vicious Circle Into an Upward Spiral

CEE — Do We Need a Launch Pad For Our On-Site Tech Intelligence in the Silicon Valley

January Kicks Off an Exciting Year for Emerging Europe

People Power Reminds the Government of the Rule of Law

Europe Needs To Be More Proactive In Embracing Armenia

The GREAT London Food Scene

Bakery in London

Stuck in Neutral: Georgia’s Constitutional Reforms

Tbilisi Parliament Georgia

Hungary and Israel: the Collision of Past and Present

Budapest synagoge

Political Tensions Rise As Croatia Allegedly Breaks the Dublin III Refugee Regulation

croatia migrants

How Will Trump’s Visit Affect Polish Politics?

Donald trump

Poland: Is it Ready, and is it Time to Adopt the Euro?

Emphasising the Incongruence Between the V4 Countries

Macron emerging europe

Could the West At Least Help Ukraine To Insure FDI Against Political Risks?

E-lifestyle and Cyber Security: Some Views From Estonia

Cyber Security Protection Firewall Interface Concept

Partnership is the Key to CEE-Indian Business

Only a United Opposition Can Defeat Poland’s Ruling Law and Justice Party

Classical building of Polish parliament. Warsaw in Poland.

Poland’s Confusing GDP Growth

Bulgaria Needs a Reform-Oriented Government to Take Full Advantage of its EU Membership

bulgaria emerging europe

Why Hungary’s New NGO Law Is Harmful for Business

Budapest, Hungary. Aerial view of the old city Budapest, Hungary with river and Parliament Building with cloudy blue sky

Serbia’s New PM Is Cut From a Familiar Cloth

Serbian flag emerging europe

The Global Outsourcing Industry — the Rise of the Phoenix

Finalising the DCFTA is Expected to Bring Multiple Benefits to Ukraine

Can Armenia Keep a Foot in Both Camps?

European union armenia russia emerging europe

The EU’s Choice: Fundamental Reform Or Disintegration

Examining How a Strong Swiss Franc Could Single-Handedly Topple Poland’s Economy

Will the New Five-day Visa-free Regime Encourage More Visitors to Belarus?

Where’s My Cheese? – The GREAT British Food Tour 2014

Cheese Shop

Czech Own Currency Insures Against Euro Losses

Euro Czech republic emerging europe

Is the Level of Foreign Ownership a Problem in Emerging Europe?

Flags of European countries flying from their capital cities. Viewed from the South.

Poland Challenges the European Identity

Poland emerging europe

Adam Smith’s Warning for Poland

The Long Tail of Global Expansion

History as Destiny? Institutional Erosion in Ukraine and Poland

The EU’s Benign Neglect Of Eastern Europe

How Will Poland Approach the Brexit Negotiations?

EU Visa-Liberalisation Strengthens Georgia’s Pro-Western Path

georgia emerging europe eu

Polish Tax Laws — Fighting a Winning Battle Against Tax Evaders

We, the Post-Communist Generation, Have the Skills to Rid of the Past And Create Our Own Future

Central and Eastern European Consumers Are Joining the Global Trends for Change

Resignation in Ukraine: War, Revolution, Crisis — Some Things Never Change

After Its Significant Rise the Georgian Economy May Now Fall

Panorama of Tbilisi, Georgia in sunset rays. Vivid, saturated, splittoned image.

Let’s Stop Wasting Time Redefining our Place in Europe

Leave a Reply

Your email address will not be published. Required fields are marked *