Poland will delay a plan to lower its rates of value-added under a draft budget bill that the government approved in a move to stabilize public finances hit by the COVID-19 pandemic.
Source
Unofficial translation
The Ministry of Finance introduces new regulations to counteract the effects of COVID-19
- The Council of Ministers today adopted a bill amending certain acts to counteract the socio-economic effects of COVID-19.
- The aim of the project is to stabilize the state budget and enable the financing of important public tasks related to the implementation of government policy.
“In order to minimize the effects of a pandemic, it is extremely important to take timely and appropriate action. And we are taking such actions, as evidenced by the solutions proposed by the Ministry of Finance, as well as our latest act, ”emphasized Minister of Finance Tadeusz Kościński.
Deferment of return to VAT rates of 22% and 7%
Due to the COVID-19 epidemic, the conditions for reducing VAT rates have not been met. According to the estimates presented in the “2020 Update Convergence Program”, lower tax revenues, as well as expenses to contain the epidemic, treat the sick, protect jobs and employees, and provide liquidity support to companies, will lead to a significant increase in the deficit and public debt.
We anticipate that the return to lower VAT rates will take place in the year following the year in which two conditions are jointly met:
- a stabilizing expenditure rule is applied,
- the following ratios will be achieved: the ratio of the net state public debt to gross domestic product not higher than 43% and the sum of annual differences between the value of the relation of the nominal result to gross domestic product and the level of the medium-term budgetary objective not lower than -6%.
This means that the reduction in VAT rates will be associated with the lasting good condition of the budget, which results from the fact that VAT revenues are the main source of the State Treasury’s income.
Provision of budgetary resources from the Support Fund, Toddler + program
Topping up with budgetary resources from the Police Support Fund concerns:
- The police,
- Border Guard,
- The State Fire Service,
- as well as the Solidarity Fund due to the implementation of the Toddler + Program.
The purpose of these changes is to enable the financing of important public tasks related to government policy. This includes covering investment, modernization or renovation expenses as well as maintenance and operating costs, financial support for the disabled, retirees and pensioners.
Non-Expiring Expenses
The proposed solution extends the time until which it will be possible to spend funds that will be indicated as non-expiring expenses. This is one of many actions that counteracts the socio-economic effects of Covid-19.
Changes in the area of land transport
The changes will concern:
- capital investments of PLK SA and the construction and modernization of railway stops in the total amount of PLN 1.85 billion,
- co-financing by the Local Government Road Fund for investments on roads managed by local government units in the amount of PLN 3.8 billion,
- speeding up the transfer of budgetary resources to investments related to land transport infrastructure.
The change will stimulate investment in infrastructure.
