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Survey: tax breaks costly but inefficient


The Polish legal system contains a total of 473 tax breaks and preferences, including 402 in central taxes (the personal and corporate income taxes, VAT and the excise duty) and 71 in local taxes, according to a pioneering survey by the Ministry of Finance and the World Bank. The Bank has calculated the combined value of 352 of these tax breaks in 2009 at PLN 65.9bn (approx. €16.6bn), or 4.9% of GDP. However, according to the report’s authors, these various preferences are generally sub-efficient, either because of poor targeting, degressiveness, or limited influence on taxpayers’ behaviour. Therefore, there is substantial room for optimisation.

The scale of tax preferences is greatest in VAT regulations (mainly in the form of reduced rates), amounting to PLN 34.2bn (€8.6bn) last year, followed by PIT (PLN 16bn or €4bn) and CIT (PLN 7.6bn or €1.9bn). The value of local-tax breaks is PLN 6.3bn (€1.6bn).

In terms of stated objectives, the bulk of the preferences are meant to support families and persons on welfare benefits, followed by “the economy”, agriculture, and healthcare.

The Ministry of Finance was quick to stress that the report was not a prelude to a major cull of tax breaks.

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