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FOR Communication 11/2019: Entrepreneurs’ test - more power in the hands of bureaucrats

  • In the test proposed by the Ministry of Finance, entrepreneurs will determine whether a given taxpayer can be considered an entrepreneur and benefit from 19% Personal Income Tax (PIT) rate, whether they should be treated as an employee and, accordingly, pay PIT according to the scale and full Social Security Administration (ZUS) contributions. This is supposed to limit the possibility of using the linear 19% PIT by persons working for one company and increase the state's revenue. Such a solution fights the symptoms and not the causes of overusing the self-employment, such as the large differences in taxation and the contribution of self-employment and work on a contract of employment. At the same time, it exacerbates the problem of bureaucratic discretion in the Polish tax system, which is a source of uncertainty for taxpayers.
  • The Polish tax and social security system is characterised, on the one hand, by high taxation and contributions to employment contracts, and, on the other hand, by a number of privileges and exceptions for farmers, miners, creators or entrepreneurs. The most burdened with taxes and contributions are people working on employment contracts, who pay about 40% of their income in taxes and contributions and owners of capital companies, who first have to pay corporate income tax (CIT) and then PIT, which in total amounts to over 34%. people with higher incomes, who pay 19% PIT and a lump-sum Social Security Administration (ZUS) contributions, running a business activity are, in turn, privileged.
  • The introduction of the entrepreneurs' test is not a reform, but an attempt to find additional tax revenues needed to finance Morawski's Five. Giving bureaucrats the right to decide who can use the 19% PIT and who is to pay the full 40% PIT and ZUS contributions will be another source of conflict between the administration and taxpayers. The right direction for reform should be to reduce differences in taxation of income from labour and economic activities so as to eliminate the benefits of creating fictitious economic activities.


Aleksander Łaszek, Chief Economist