Flat tax: is it a good idea?

One of the issues that is dividing the right wing parties set to form the next coalition government in Poland is whether the nation should follow other central European, ex-communist countries and adopt a flat tax system. (photo: Hanna Gronkiewicz-Waltz)

Leading Civic Platform figure in Warsaw, and onetime Head the Central Bank in Poland, Hanna Gronkiewicz-Waltz, is one who thinks that having low tax for everyone – including the rich - is the way forward for an economy like Poland’s. She told Radio Polonia this week:

‘Countries which adopted a more liberal approach are much more successful than those countries which adopted more socialist visions in the past. Our program is not only for the rich but also for unemployed people, because in Poland we have high unemployment, about 18 percent, so we would like to reduce taxes, reduce the cost of labor and introduce a flat tax. We think that it increases the contribution to the budget and it means that there are more incomes, more revenues.’

Low, flat tax policies have been put into practice in Slovakia. In 2004 it swept away 21 categories of personal income taxes, five tax brackets, and scores of exemptions and deductions, replacing them with a flat 19% rate. Politicians there say that this has brought in much needed investment and stimulated the economy, creating thousands of jobs.

The flat tax system is also good, say believers, for dragging people out of the black economy. Poland has thousands in work who don’t pay any tax, or social security payments at all.

Law and Justice (PiS)– a populist rightwing, conservative party who will be in the coalition with Civic Platform – disagree. They think that the priority should be to those on low incomes and the unemployed. Adam Bielan from PiS told us:

‘The Civic Platform is a classical liberal party. Their proposal of flat tax is not acceptable for us because we think that 25 years after Solidarity was born we also need more solidarity, and we are afraid that with these proposals real populist parties like Samoobrona could win the next general election after this one. So it could be quite dangerous for the stability in Poland.’