The Polish economy needs to be pushed onto a fast growth path as soon as possible and implement fundamental reforms if Poland is to meet the developmental challenges of and prepare for membership in the European Union. Meanwhile, the political will to introduce reform is nowhere in sight, neither within the government nor parliament. The past months have been completely lost in this respect. There is a strong feeling among entrepreneurs that the government is putting off reforms. Irritated with political sluggishness, entrepreneurs finally came up with their own recovery program.
Eleven leading business organizations operating in Poland have resolved to establish the Enterprise Council, their own representation and a new, strong social partner for the government. So far authorities have complained about fragmented representation from business circles; following the transformation, many business organizations emerged in Poland whose operations have been more or less visible. Each has been operating independently. The emergence of the Enterprise Council means a change in quality-business organizations have decided to cooperate with one another and, due to their strength will influence economic policy.
For the first time since 1989, organizations representing the Polish business community, from small traders to big banks-which have gained stature and strengthened their position over the 12 years of transition-have sat down at the same table; they are now speaking in unison. The Enterprise Council put some ready drafts on the table, a general program for improving the economy: "Jobs and money for the people," and a project involving Personal Income Tax (PIT) and Corporate Income Tax (CIT). Entrepreneurs say their proposals are well thought-out, and in the case of taxes-prepared together with Finance Ministry officials.
Stanisław Szewczyk, president of the Foreign Investors' Chamber of Industry and Commerce, says that business circles have had enough of ideas that fail to address the root of the problem. The most important issue is the influx of money to the economy, the Enterprise Council says. "We must create conditions for investors that will attract foreign capital. We're beginning with a jump-start in the form of introducing a general 18-percent PIT with a tax-free amount of zl.4,000, accompanied by 18-percent CIT," said Szewczyk. He added that the influx of money to the economy resulting from a reduction in PIT would lead to greater demand from consumers. On the other hand, money left by the taxman in companies would enable them to catch a breather. One can count then on an increase in the number of jobs in enterprises.
Szewczyk says he is worried that unless taxes are reduced in Poland, immediately after accession to the EU, Lithuania and Latvia-also in the group of EU candidates-will attract greater foreign investment. Both countries have good tax solutions, including flat tax rates and legal infrastructure, in addition to a cheap labor force from Russia.
According to entrepreneurs, it is also necessary to restore proper relations between the reference rate of the central bank and the inflation rate, so that Polish businesses can take advantage of loans. The absence of affordable loans makes it difficult to buy raw materials; restructuring and modernization are also difficult. The high cost of loans results from the fact that the difference between the reference interest rate of the National Bank of Poland (NBP) and the inflation rate is about 5 percent, against 1-1.5 percent in most European countries. Commercial banks must also make mandatory provisions-too high, according to the business community-in the NBP, which limits their lending activity. Polish banks are criticized for preferring to buy profitable Treasury bonds instead of granting loans.
Another urgent issue is the use of EU funds after accession. Many Polish local governments are indebted. To take advantage of EU assistance, which requires local governments to make their own contributions, it is necessary to launch public-private partnerships (PPP). Such a mechanism can relieve the state, which will not have to support the construction of roads, sewage treatment plants and water systems in individual communes from the national budget. PPP can be used not only to build infrastructure, but create registers of real estate and a central register of vehicles, currently unavailable in Poland.
Henryka Bochniarz, president of the Polish Confederation of Private Employers, says that the role of the state continues to grow. The program submitted to the prime minister by the Enterprise Council states that without accelerating privatization, promoting deregulation and limiting the role of the state in the economy, the economy cannot be improved.
"The legal solutions that we propose can be defined in this way: as little state intervention in the economy as possible. We believe that there should be one law on business freedom that will set the conditions for the functioning of enterprises, that there should be a single tax law that will limit the arbitrary interpretation of regulations by officials. Only then will entrepreneurs be guaranteed stable conditions for operations that we are fighting for," said Bochniarz.
Businesspeople say that now is the right time for reforms as radical as those of 14 years ago, when Poland decided to move from communism to capitalism. "If it was possible to prepare a whole set of laws that revolutionized the economy in the early 90s, there is no reason why we should not go ahead with another radical reform in cooperation with all the communities and intensive work from the government and parliament," said Bochniarz.
The appeal from entrepreneurs has not gone unanswered: Prime Minister Leszek Miller promoted Jerzy Hausner, the minister of the economy, labor and social policy, to deputy prime minister and asked him to supervise the government's economic policy. To the surprise of many other leftist politicians, the prime minister has also welcomed the flat tax rate idea. Clearly bowing to the proposals of the business community, June 17 the government decided to reduce CIT in 2004 from 27 to 19 percent. However, at the same time, some tax breaks and exemptions will be removed for this group of taxpayers. The tax cut should help create new jobs and attract foreign investors.
"We have decided that a major reduction in CIT will provide the impetus to stimulate economic growth. The issue of tax breaks must be consulted with other ministers," said Andrzej Raczko, the new finance minister, at a news conference.
The Enterprise Council established at the beginning of 2003 has strong potential for persuasion; at the beginning of June it presented a program for introducing a flat-tax to Prime Minister Leszek Miller, an idea which the left had earlier firmly rejected. Now it is being discussed within the Democratic Left Alliance (SLD), the government and the media. Earlier the issue provoked violent protests and was seen as a liberal whim. The council presented its proposals to the Sejm and at the Presidential Palace and, later on, introduced them efficiently to the public.
If the government turns down the Council's program "we will consider seeking the support of other parties or coming up with a civic initiative," Bochniarz announced.
The Enterprise Council is a loose forum of affiliating Poland's largest business self-regulation organizations, entrepreneurs and employers. Council members include the American Chamber of Commerce in Poland (AmCham), the Business Centre Club, the Foreign Investors' Chamber of Industry and Commerce, the Confederation of Polish Employers, the Polish Chamber of Commerce (KIG), the Central Board of Trade and Service Associations, the Polish Confederation of Private Employers, the Polish Business Council, the Polish-German Chamber of Industry and Commerce, the Association of Managers in Poland, and the Polish Craft Association.
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