FOR Communication 24/2017 : Lifting of the limit on pension contribution: further tightening of the tax screws and a blow to innovation
Synthesis
Government declares a good state of public finances but at the same time intensifies its search for new ways to drain the taxpayers’ pockets. The newest example is provided by the work currently in progress on lifting the upper limit on pension contributions. As a result, for earnings starting at about 6 thousand PLN net monthly, each additional zloty paid by the employer will be burdened with 52 groszes of taxes and premiums, and only 48 groszes will go to the employee.
A further increase in taxation of people working full-time will create strong incentives for fictitious self-employment, where the taxation is only 19 groszes instead of 52. The related fall in state revenues will provoke inspections in companies and numerous disputes between taxpayers and the state administration.
Such a sharp increase in taxation of people with higher qualifications and earnings contradicts government declarations on supporting innovation. High taxation of salaries, which are relatively low against the background of the EU labor market anyway, will make working in Poland even less profitable for high-class specialists.
The abolition of the limit on social security contribution will mean an additional increase in the hidden debt, by 5 billion PLN annually, despite the fact that it already amounts to over PLN 3250 billion.The rising cost of pensions and the low level of benefits (especially for women due to lowering the retirement age) will create pressure on ZUS (Social Insurance Institution) to reduce the highest pensions in the future. Therefore, despite the increase in ZUS contributions, the abolition of the 30-fold limit will not be accompanied by a proportional increase in pensions in the future.
Full communication aviliable below in Polish.
Contact with the author:
Aleksander Łaszek, chief economist at FOR
e-mail: aleksander.laszek@for.org.pl
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