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Finance Ministry proposes new public finance rules to cope with public borrowing


The Ministry of Finance has prepared an amendment to the Public Finance Act that envisages drastic fiscal adjustments over a period of three years in case public debt exceeds 55% of GDP. The objective is to reduce public debt and the cost of its servicing by limiting the borrowing needs of the public sector.

The proposed adjustments include various tax-raising changes, such as the abolition of child and internet tax reliefs, which is estimated to bring PLN 6bn or €1.5bn in extra tax revenues annually; less favourable tax rules for workers in the creative industries and those employed on the basis of "services rendered" contracts; the freezing of personal income tax brackets; or further one-point increases in VAT rates (on top of the one that will lift the basic rate to 23% as of 2011), to a maximum of 25%.

If public debt exceeded 55% of GDP already in 2010, the ministry estimates that the above measures would bring PLN 3.7bn (€0.9bn) in 2011, and a total of PLN 16.7bn (€4.2bn) over 2013-2014.

The document also introduces a new spending rule that caps increases in discretionary spending at inflation plus one percentage point.

The draft bill will go through a consultation process before it is submitted to the full cabinet.

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