Poland Scraps Income Tax for Citizens Under 26
Starting August 1st, Polish youth will be exempt from paying income tax as long as they work in the country. The lower house of Polish parliament approved the measure introduced by the current Law and Justice (PiS) party, that would allow workers under the age of 26 to earn tax free income. The objective of the law is to attract young workers who left the country, in what many have called the Polish “Brain Drain”, to return to Poland.
Enticed by higher wages and opportunities in western Europe, many young Poles have taken advantage of the freedom of movement allowed by the EU. Heather Rolfe, the head of employment and social policy team at the National Institute of Economic and Social Research, a think tank in London told CNN, "The research that has been done on young Polish migrants in the UK has highlighted that often young people leave as a kind of rites of passage, they will go to get away from their family, to gain some independence."
Prime Minister Mateusz Morawiecki said, “it's as if the entire city of Warsaw left, it's a gigantic loss. This must end, young people must stay in Poland." Since Poland joined the EU in 2004, nearly 5% of the population has moved to work in other countries in the EU. The new plan exempts Poles under the age of 26 who earn less than 85,528 Polish zloty ($22,547) a year from the country’s 18% income tax. The exemption seems to be a good deal, since about two million people will qualify and the average Polish salary is around 60,000 zloty ($15,700) a year.
The Independent found that the wide-spread emigration has led to skills shortages, with every third employer in Poland reporting a shortage. Such skills shortages are highest in the construction, manufacturing, mining, and transport sectors, according to a European Commission analysis. "In the past three (or) four years we started seeing worker shortages and (realized) that we need those people back," said Barbara Jancewicz, who heads the Economics of Migration Research Unit at the Center of Migration Research in Warsaw.
CNN spoke with Kinga Kitowska, a 22-year old corporate analyst who moved to London for study and stayed after getting a job in finance. Even though she thinks the government's offer is generous, she is not planning to return. "To make young people stay in the country, I don't think that's the way to go," she said. "It's about building opportunities and opening sectors which are attractive for young people at the moment."
The tax exemption is one of many welfare initiatives promised by the PiS. The government expects the welfare package, which also includes new benefits for families with children and bonus pension payments, to cost 40 billion zloty ($10 billion). Morawiecki insists the reforms are an investment in society and the economy. The law gained overwhelming support in the PiS-dominated Polish parliament, though it has sparked some criticism too.
Ryszard Petru, Member of parliament for the Now! Party (T!), said in parliament that instead of making young people better off, the costly new law will likely lead to employers slashing wages, keeping the after-tax pay packages the same. “And what will happen when they turn 26? They will be made redundant because suddenly, they'll be more expensive.”