Higher rates of taxes on goods and services: 23 percent basic. and it was reduced by 8 percent. – For the first time, the PO-PSL government was introduced in 2011. The next cabinets extended the assumption of a temporary increase every two years. Now the Ministry of Finance wants to break with an impromptu. Instead, it proposes a rigid and statutory registration of conditions, after which the VAT rate will automatically return to its basic values: 22 and 7 percent. (Formally, that's what they will continue to be). However, there is no reason to expect the reduction to occur quickly.
According to the ministerial project, the return to lower rates will no longer depend directly on the decision of politicians, but on the level of deficit and debt of public finances. It will increase to rates whenever two conditions are met. The first: public debt reduced by the amount of money MF has in their accounts, for example, after the sale of securities, will remain above 43%. GDP (according to the Ministry of Finance, last year was 47.7% of GDP, this year will reach 45.9% of GDP).
The second condition: the difference between the deficit in the public finance sector and the goal that Poland has undertaken to reach will be more than 6 percentage points. GDP The goal is a deficit of 1 percent. The GDP and the difference in question is the accumulated value calculated from 2015, in the terminology of public finances, called control sum. This temporary cessation came from the fact that 2015 was the first year in which the rule of fixing the public spending limit was established, the control of which is the only important element. The criterion of a sufficiently large sum of verification is also met: in 2017 it was 6.28%. GDP And that is enough to keep rates of 23 and 8 percent.
Although the return to the smallest VAT will be difficult, it is not impossible. If we think of the ministerial forecasts, this year the sum of checks will fall below 6 percentage points. GDP However, the public debt will be reduced to the required level in just three years.
The discount may be in the next term
The Ministry of Finance will publish today a draft amendment to the VAT Law. It will replace the current "temporality" of the application of increased rates with a strictly defined mechanism. The amount of the types will depend on the size of the debt and the deficit of the public finance sector. The ministry had to face the issue because at the end of this year the term of two years will expire to apply the increase introduced for the first time by the PO-PSL government in 2011. If the ministry did not prepare the amendment, from January 1, 2019 the tax would return to its base rates, 22 percent. Basic rate and 7 percent reduced.
The persistence of the surplus in the national cashier's box (after September exceeded 3,000 million PLN in the positive ones) does not change the fact that a fall in the rates would mean a considerable loss in the income of the VAT. It is PLN 7 billion. The result of this year's public finances will be very good (0.3 percent of the GDP deficit according to the International Monetary Fund). Next year, due to the weakening of economic growth, it will be difficult to repeat. And a drop in VAT revenue would be an additional blow that the MF can not afford.
The resort was looking for an indirect exit. One that will not change the fixed rates at fixed rates (formally the base rates are still 22 and 7%), but it will not allow it to return to the matter in a few years. It should be a mechanism strictly related to the rule, through which a public spending limit is established each year. By default, the Ministry calculates, taking the expenses of the previous year and increasing them by the average GDP of the last six years (plus its forecast for two more) and the inflation objective of the National Bank of Poland (2.5%). If the financial deficit is too high or the debt is too high, the limit should be adjusted. The Public Finance Act clearly defines the amount of these adjustments. The first one, 1.5 percent. The spending limit is made when the public debt reduced by the amount of free resources available to the Ministry of Finance exceeds 43%. GDP or – and this is the second premise – the deficit is too high in relation to the objective that the government should aim to prepare the budgets. The goal is to keep the deficit at 1 percent. GDP The correction is carried out, if counted from 2015 (that is, from the year in which the rule was applied for the first time), the cumulative difference between the real deficit and the sum of verification of destination exceeds 6 percentage points. GDP
The reduction of the VAT type should generate reductions in expenses
The ministry officials propose that the return to lower VAT rates should take place when the spending limit should not be adjusted. That is to say, when the debt and the deficit fall to levels sufficiently low.
– Our intention is that the return to reduced VAT rates does not imply drastic reductions in expenses. The norm of expenditure works in such a way that the extraordinary modification of the income derived from the reduction of the type of VAT must generate a reduction of the expenditure to the same extent. Therefore, a good fiscal situation, when the mechanism of correction in the rule of expenditure ceases to function, determined by a high deficit or debt, will allow an increase in the level of expenses by 12 million PLN. This is the amount that could be used to finance the reduction of VAT – says Deputy Finance Minister Leszek Skiba.
For now, adjustments need to be made, because the debt reduced by free funds in 2017 was 47.7%. The Ministry calculates the GDP and the "sum of control", at 6.28 percentage points. GDP
The dependence on a return to the smallest VAT of the size of the deficit and the debt means that Poland will apply rates increased during at least five years. The duration of this period can be estimated based on available MF forecasts. In the justification of the next year's budget project, the Ministry expects the amount of debt to be taken into account in the VAT determination mechanism to remain above the required value, that is, 43%. GDP – up to 2021. And it is enough to use increased rates, although this year the sum of verification will decrease below 6 percentage points. GDP due to the low deficit recorded in 2018
The fact that the criteria allow the departure of 23 and 8 percent. The VAT will be completed in 2021, but that does not mean that the tax will decrease automatically. In accordance with the bill, this will happen with a slip of two years due to the publication dates of the data by the Central Statistical Office. The real debt for 2021 will not be known until the end of 2022, which means that the basic rate of 22% is restored. and reduced to 7 percent. It could only take place after 2023.
The draft published today does not include another important solution that the market expects: the VAT matrix. This is a new assignment of individual goods and services to tax rates. Today's system based on the Polish classification of goods and services used by the Central Statistical Office raises many misunderstandings and taxpayers do not always know what rates are. For this reason, the PKWiU for the effects of VAT must be replaced by the CN classification used in international trade. The new matrix is neutral for the budget.
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