The document points to a number of irregularities and diseases in the management of public funds, which have led to a decrease in financial transparency and an increase in taxes and debt, while reducing parliamentary oversight of spending.
The ministry warns: “Unfortunately, taxes have risen significantly in recent years, the rationality of spending money has declined, and public debt, according to the European Union’s methodology, is on its way to exceeding the threshold of 60 percent of GDP.” Finance is at the forefront of the report, and the Ministry confirms that the current state of public finances “requires broad public debate and choices regarding how to continue disposing of public funds,” as we read in the document.
The White Paper presents a picture of the state of the country's finances as faced by the new government. Some corrective measures have already been taken, but the scale of violations is so large that reforming the public finance system will take years, as we read in the study.
State finances are complex and opaque
One of the main topics of the white paper is: Changes in the structure and performance of the public finance sectorWhich led to a deterioration in transparency and control over the spending of public money.
The current government accuses the previous government of lacking unified and clear rules for establishing and operating public finance sector units. As indicated by the Ministry of Finance. In the years 2016-2023, more than 400 new units were included in the public government sector. But these entities were created without uniform and clear rules, and some were used to fund unwarranted or duplicative missions.
The Ministry says: “The failure to unify the rules for establishing and operating units, and the use of newly created institutions to finance unjustified tasks, led to a waste of public money.” The report describes, among other things: the transfer of funds between entities for which additional rewards were collected, without actually solving social problems.
15 funds created by BGK
It has also become a symbol of reducing public financial transparency Special purpose funds created at Gospodarstwa Krajowego Bank. As many as 15 of them have been created since 2016, and their total spending has increased more than 7 times, from PLN 15.4 billion to PLN 131.7 billion in 2023. According to the Ministry of Finance's calculations, this means an increase of more than PLN 100. Billion or 3 percentage points. Percentage of GDP. Creating new funds and units required additional procedures and debt service costs, which were ultimately borne by taxpayers.
Another allegation concerns the implementation of assistance programs for companies by the Polish Development Fund during the pandemic, bypassing the state budget and public authorities. According to the Ministry, the political finance watchdog's remuneration for operating financial shields, estimated at PLN 1.45 billion by 2030, It was definitely exaggerated. The Ministry recalls the reservations of the Financial Supervision Bureau regarding how this assistance will be implemented.
There are particular doubts about the contract with PFR for the operation of the “Shield for the Borderland”, for which the company received an amount of PLN 738,000. PLN in commission, although in the end no one benefited from this program. “The agreement with the political finance watchdog is extremely unfavorable to the state treasury,” the authors of the white paper summarized.
Creatively circumvent financial rules
The Ministry of Finance report demonstrates that deteriorating fiscal transparency has also made it easier to circumvent the Spending Stabilization Rule (SRW) and other fiscal restrictions.
One such practice was the government transferring treasury bonds to various entities in the public finance sector instead of standard budget subsidies. In total, in the years 2016-2023, approximately PLN 66 billion worth of bonds were transferred in this way. This measure made it possible not to show these operations as expenditures in the state budget and to “creatively shape their results” – as we read in the report.
Another way to “circumvent” SRW is excessive use of so-called non-expiring expenses, that is, budget funds spent after the end of the budget year. This was possible thanks to special regulations that temporarily extended the standard deadline for its implementation from March 31 to November 30 of the following year. According to the Financial Supervision Bureau, whose opinion was conveyed in the report, this matter led de facto to the parallel work of two government budgets and made it difficult to control some expenditures.
Finances out of control
The Ministry of Finance also claims that the increase in public spending observed in recent years was possible due to a significant increase in taxes on citizens and the authorities' circumvention of fiscal rules. This is under the pretext of rebuilding the economy after the pandemic, especially by implementing many expenditures outside the state budget.
It is estimated that approximately 80 percent of the total spending of general government institutions is outside the state budget. Supporting the economy after the pandemic was necessary, but as the Audit Bureau’s audit showed, this was done in a chaotic, non-transparent and ineffective manner, as we read in the document.
The document also discusses rising taxes, the deteriorating quality of local government financing, and shows how debt and deficits are growing.
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