The Polish Deal raised the tax-free allowance tenfold but removed the possibility to deduct the obligatory healthcare insurance premiums from taxes, leaving mid- and high-income earners poorer, while low-earners gained on the changes. Additionally, entrepreneurs complained about increased burdens as their obligatory contributions were raised from January.
To mitigate the negative effects of the reform, the government introduced a middle-class allowance which, in theory, was meant to shield the middle class, but the solution was fraught with its own problems and proved to be unclear even to tax advisors and accountants.
Mateusz Morawiecki, the prime minister, said after a government meeting on Friday that the middle-class allowance was a poor idea and would be scrapped. Instead, the basic rate of the personal income tax (PIT) will be lowered to 12 percent from 17 percent, he said.
"We're removing the rightly criticised middle-class allowance and at the same time we're lowering PIT… and it's the strongest reduction in years that will cover millions of taxpayers," Morawiecki said.
Artur Sobon, a deputy finance minister who prepared the latest amendment to the tax reform, said some 13 million taxpayers would benefit from the changes, while the rest would be unaffected.
"After its introduction, about 15 million Polish taxpayers will not be paying PIT," Sobon said, adding that the cut will cost the state budget 30 percent of its current personal income tax revenue.
Morawiecki also said changes to health insurance rules would be beneficial to some 1.4 million entrepreneurs.
Commenting on the quickly-rising prices in Poland, with inflation reaching 11 percent in March, the prime minister blamed Russia and its aggression on Ukraine for destabilising European economies.
"In order to compensate for the deficit in (people's - PAP) wallets caused by high prices - and these high prices are a result of price manipulations by (Russian gas giant - PAP) Gazprom and the war in Ukraine - we're proposing lower taxes, just taxes and simplified taxes," Morawiecki said.
According to Sobon, if parliament managed to pass the legislation without delay, the new solutions could come into force from July. (PAP)