2019-06-18
FOR Communication 23/2019: PSL’s election promises - this is nothing new
During the last national council, the PSL (Polish Peasant’s Party) repeated a number of its earlier proposals, the implementation of which would lead to a deterioration in the state of public finances. Returning to these proposals in a situation of growing deficit caused by the implementation of the Law and Justice party election promises is dangerous for Polish public finances.
- The cost of the latest PSL election promises is in the amount of about PLN 40 billion. Although the party did not provide many details, the individual promises in the conditions of 2020 can be estimated at:
- PLN 18 billion - exemption of pensioners from PIT
- PLN 15 billion - PIT reduction to 10% for the self-employed
- PLN 6 billion - 500+ for students for PLN 6 billion zero VAT rate on traditional goods is difficult to estimate, as it all depends on the definition of the goods adopted
- These promises add up to those already adopted and announced by the current government, which intends to keep the deficit below 1% GDP in 2020 by tightening the taxation (increase in taxation and labour tax in the second tax bracket to 52%, contribution to civil law contracts, liquidation of the contribution going to open retirement funds, increase in excise tax, digital tax, solidarity contribution, recycling contribution).
- According to government plans, the public finance deficit is expected to reach 0.9% GDP in 2020, which means that after fulfilling the PSL' promises, it would increase to 2.6% GDP. The European Commission is more cautious and forecasts a deficit of 1.3% GDP for 2020, which, together with the promises of the PSL, would give 3% GDP. This means that even with a slight economic slowdown, the deficit will increase significantly above the EU 3% threshold, forcing the government to raise taxes and reduce expenditures.
Author:
Aleksander Łaszek PhD, Chief Economist
[email protected]
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