This is where Tusk should look for money.  Economists reveal the ways

Opposition Promises What is KO Planning?

In Poland, every pensioner, every pensioner has a pension of up to 5,000 Polish zlotys. PLN, you will not pay income tax. Those with a higher pension will pay this tax, but at a much lower rate. And when it comes to working people – anyone earning up to PLN 6,000. PLN, you will not pay income tax. And those who earn more than 6,000 Polish zlotys (PLN) will pay much less taxes – announced the leader of the Civic Platform, Donald Tusk.

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See also: The biggest challenge facing Tusk. “It’s a slippery slope. You have to turn around.”

Other more important points of the KO program include:

  • Increasing the amount of tax exemption – from PLN 30,000 up to PLN 60,000, in case of settlement of taxpayers according to the tax schedule, including entrepreneurs and pensioners;
  • – Increase teachers’ salaries by at least 30%. – At least PLN 1,500 gross bonus for the teacher; Introduction of permanent automatic re-evaluation system;
  • Introducing a second indexation of pensions and annuities when inflation exceeds 5 per cent;
  • Within the framework of the “Active Mom” program, PLN 1,500 are paid per month to take care of children – the so-called “grandmother”;
  • Eliminate the ban on trading on Sundays, giving every employee two weekends a month off and double pay for working on vacation days;
  • Introducing the “Entrepreneurial Holiday”: a free month of social security contributions and vacation equivalent to half the minimum wage.

After this year’s results are resolved elections Parliamentary discussions took place about the sources of funding for the above-mentioned promises. Let us remember: the Law and Justice Party won the elections by 35.38%, giving it 194 seats, but the opposition can count on a total of 248 seats. This gives it a majority in the House of Representatives.

Reduce expenses

According to the expert, there is little room to fulfill electoral promises. – The solution may be rationalization, that is, reducing or expanding some current expenses, including armament expenses, over time. – says BoJack.

Political ads indicate that existing social programs and benefits will not be limited. In such a case, the implementation of promises may be postponed somewhat to later years, so that economic growth ensures that they are financed by the increase in the tax base. However, this may not be enough to “comply” with EU restrictions. He points out that it may also be necessary to broaden the tax base and increase effective tax rates by reducing various types of preferences and exceptional solutions used in response to shocks in recent years.

We also asked Dr. Mihail Modzin of the Polish Economic Network (PSE), a lecturer at the University of Economics in Krakow, about the source of funding for the opposition proposal.

Increasing deficit

The simplest answer to this question in the short term is to increase the deficit. The macroeconomic situation is reflected in economic indicators that remain weak, with rapid improvement in the current account balance and low inflation It allows us to be cautiously optimistic about the possibility of increasing the deficit even beyond what the outgoing government proposed – says Możdżeń.

As he adds, a large part of the deficit will not stimulate the economic situation, but will go in the form of interest on the debt to the financial sector and abroad as part of military spending. He added that there are also possibilities to finance the deficit, especially in light of the continuing rise in excess liquidity in the banking sector and the relatively low level of the ratio of bonds to the sector’s assets.

What does the European Union say about this?

However, the PSE economist believes that some problems can be solved by the new government.

In the next two years, the European Union’s excessive deficit measures may pose the greatest threat to the ability to finance deficit spending. There are several issues here, such as the inclusion of military spending in the deficit, the eventual estimated level of change in the structural balance, and the severity and timing of potential recommendations. European Commission Regarding deficit reduction, it is still unknown. I think a lot will depend on the negotiating skills of the new government, emphasizes Dr. Modgin.

The expert also talks about pressure on some public finances, including: through the introduction of the Polish system. – indicates that many of the proposals of the coalition preparing to govern are aimed at deepening this unfavorable situation of public finances. As a solution, he points to tax and contribution reforms that would allow income to increase.

The source of financing and increased budget expenditures is income or loans – says Kamil Sobolevski, chief economist at Employers in Poland. He adds: – Election promises include increasing expenditures (such as increases in the public sector) and reducing income (such as a tax exemption of 60 thousand Polish zlotys), and therefore borrowing needs will increase.

How not to disappoint voters?

The expert expects that the new government will likely be guided by political interests, with the aim of strengthening the majority’s popular support for the ruling coalition. – With the debt-to-GDP ratio at around 50%, it will be difficult for him to convince voters of the challenges facing budget financing.. There are many such challenges and they are objective in nature – emphasizes Sobolevsky.

First, markets are not prepared to absorb the amount of debt. Total borrowing needs this year amount to PLN 420 billion without the possibility of extending the zero VAT on food or fulfilling election promises. Second, global financial markets are experiencing turmoil linked to massive borrowing needs in the United States, where yields are breaking records not seen in decades. Thirdly, there are also debts on the funds of Gospodarstwa Krajowego Bank and the Polish Development Fund to cover expenses and the maturity of old debts, says the chief economist of the Polish Employers’ Organization.

Fourth, some expenses were included in the contracts but have not yet been paid, so they were not included in the cash budget. We do not know the exact value of the commitments made, for example, the purchase of military equipment. Fifth, public finances also affect local governments, which in an election year will find themselves in the grip of limited tax revenues and rising costs, including the salaries of officials and teachers, and higher costs and fixed prices for municipal services – says the expert.

According to Sobolevsky, all this means increasing the issuance of external and domestic debt, including a return to issuing short-term securities, such as treasury bills. – Financing borrowing needs will become a quiet but almost the most important task of the state, with a significant impact on the economic, social and political stability of the country. – sums up.

Paweł Gospodorczyk, journalist at money.pl

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