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Monday, October 03, 2005

Will we get a flat tax after all?

Radio Polonia:

Possible agreement on tax reached by new coalition

One of the major differences between the victorious Law and Justice and the runner-up Civic Platform in the parliamentary elections has been the issue of taxes. Now the two parties seem to be closer to reaching a compromise on the matter.

During the election campaign the Civic Platform had been under sharp attack from Law and Justice for its proposition of a 15% flat tax system to replace the present three-threshold scheme ranging from 19 to 40 %.

Many political analysts have even attributed the latter's ballot results to this success discrediting the idea in the eyes of the low earning electorate. However, it comes from the general outlines presented by the Law and Justice prime minister designate Kazimierz Marcinkiewicz that their position on the personal tax policy might be leaning towards the Civic Platform concept.

Law and Justice proposes progressive 18 and 32% rates, but bearing in mind the second rate will encompass only some 100 thousand taxpayers from the highest income groups, this places well over 23 million (or 99.5% of bread earners) in the first, 18% bracket. Isn't this actually a camouflaged flat tax system, something the Civic Platform had advocated all along? Mateusz Walewski, an expert from the Center of Socio-Economic Analyses, says it might appear that way at first glance, but there are differences.

The two proposals vary mainly from the administrative perspective, the economic aspect being quite similar in both. However, Richard Mbewe from the Warsaw Investment Group points to one Law and Justice tax innovation, which may backfire on the budget - considerable reductions for large families.

Still, can we consider the narrowing of differences on one of the major bones of contention between Law and Justice and the Civic Platform a signal for increased chances for a coalition cabinet of Kazimierz Marcinkiewicz? Political commentator Andrzej Krajewski says the yet unresolved presidential race might prove an obstacle to the otherwise positive tendencies.

Speculations can be heard that should Lech Kaczynski fail to win the presidency, his brother Jaroslaw, who is the Law and Justice leader, might want to switch him for Kazimierz Marcinkiewicz as government head. And this is something, which seriously worries the Civic Platform.


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