Friday, September 30, 2005

Taxing negotiations

Future ministers on the Law and Justice side of the future coalition government said this morning that negotiations have already turned into ‘a political TV reality show’.

On Thursday, Polish media were suggesting that a possible breakthrough was close between Law and Justice (PiS) and Civic Platform (PO), the two parties which will be making up the next Polish government.

PO stood on a low 15% flat-income tax policy in the elections, whereas Law and Justice gained many votes appealing to poorer members of the electorate who feared that tax cuts would mean cuts in benefits and pensions.

The talked about deal was said to involve an 18% flat tax, higher than Civic Platform had promised if they had been the largest party in parliament, but a flat tax all the same.

Law and Justice spokesmen have since muddied the waters somewhat. They have said that they want tax incentives to be put in place for larger families – a kind of reverse Chinese tax policy, and a very Catholic proposal if ever there was one – and that they suggest a progressive tax system of between 18 and 32 percent.

This is a reaffirmation of the position that they campaigned on. But a closer look suggests that this is a flat-tax policy in all but name. Ninety nine percent of earners fall into the 18 percent tax bracket, leaving only 100,000 in the top bracket.

The position of little-known economist, Law and Justive MP Kazimierz Marcinkiewicz becoming Prime Minister seems to depend on the results of the October 9 presidential elections. Many believe that if Donald Tusk from the Civic Platform becomes president, Mr Marcinkiewicz may be immediately replaced by Jaroslaw Kaczynski.

After talks yesterday afternoon an agreement seemed still some distance away. Political posing on TV followed, with Marcinkiewicz saying: "We are no closer to the coalition. We are still waiting for the Platform to say whether they want to build a coalition with us, or want me to make my own government."

We may have to wait until the second round of the elections scheduled for October 23 before the name of the new PM is known, if the contest goes to a second round.