“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” So thought Sir Winston Churchill and, while economics was certainly not his strong suit, it is hard to dissent from the sentiment. And there is no doubt that Poland, despite the immense progress made over the last two decades, certainly needs more widespread prosperity.
Poland’s newly installed President Duda seems to grasp this. If his proposals to increase the tax free allowances come into force, some twenty per cent of Poles will be free from paying personal income tax. Based on information from the Ministry of Finance, the newspaper Rzeczpospolita reports that raising the tax free threshold to PLN 8,000 could remove four million Poles from the income tax net. As we saw in Taxes, even this figure would be very low by European standards with the UK, a favourite destination of Polish emigrants, having an equivalent threshold of PLN 63,000.
At present, some 20 million Poles fall within the personal income tax net. Paweł Szałamacha, a PiS member of parliament and co-author of that party’s economic programme, said the proposed changes would relieve those working part-time, on self-employed contracts and pensioners, making the indisputable point that those whose income is not enough for basic living cannot pay tax. He would like those with incomes below the subsistence level (PLN 460 per month) to be exempted from tax and later those earning less than PLN 850.
This is of a piece with President Duda’s view that Poland needs to improve its standard of living so that Poles don’t need to emigrate for work. Speaking on Sunday, his fourth day as president, Duda said that “What is of the utmost importance, and at the same time a great ambition of mine, is to improve the quality of the everyday life of Poles,” He told a meeting with residents of Sucha Beskidzka in southern Poland that he is of the opinion that this is the only way of stopping young people from travelling abroad. “If the standard of living moves closer to that of Western European countries, it will not be necessary for [young people] to leave…. Everyone will be able to realise their professional and life ambitions [...] in the country. This is now extremely vital,” the president said.
Indeed it is for, despite Duda’s favourable inheritance, there are some storm clouds gathering in the blue skies of a scorching Polish summer, not least caused by the summer itself. Last Friday, the Polish power grid operator called for a reduction of power consumption during periods of peak demand. It imposed restrictions on the supply and consumption of electricity at 10am on Monday causing ArcelorMittal, amongst others, to reduce production. ArcelorMittal is the largest steel producer in Poland, with approximately 70 percent of the Polish steel industry capacity. The group includes Zdzieszowice Coke Plant, the largest coke producer in Europe, and ArcelorMittal Poland and its subsidiaries employ more than 14,000.
The restrictions are connected with the continuing heatwave, with temperatures in the mid-30s C since the end of July, and the low level of rivers and which affects supplies of water used in cooling circuits. It also speaks volumes about the true state of Poland’s electricity generation industry. Power is fundamental to economic well-being, and there will be no increase in prosperity if industrial production halts every time the sun shines for a few days.
Meanwhile, Ewa Kopacz, the prime minister, whose days do seem increasingly numbered, has appealed for calm. “I want to assure you that there is no reason to panic, and I appeal to all of our public spirit, that in this difficult period for all of us, especially in the hours between 11.00 and 15.00, where you do not need to use electricity, save energy. This will help in resolving this situation.” Keep calm and smoulder on, as she didn’t quite say.
Of course, Poland is not alone in energy mismanagement and the UK, which certainly should know better, has also failed to grip long term power supply, despite successive governments having been fully aware of the problems for over two decades. Will governments never learn the link between cause and effect, and that (constructive) action speaks louder than words? They should remember Euripedes: “Much action, much prosperity.”