PIT Abolition & 800+ Cut: New Polish Petition

A petition was submitted to the Sejm requesting the abolition of personal income tax (PIT) in exchange for the liquidation of the “Family 800+”, “13th pension” and “14th pension” programs. The author of the document indicates that such a solution would be neutral for the state budget, simplify the tax system, increase the net income of citizens and introduce compensation mechanisms for local government units, securing their financial stability. The petition refers to data from the Ministry of Finance and previous budget analyses, arguing that the liquidation of PIT and social programs could become a universal, fair and transparent solution.

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A petition appeared in the Sejm regarding the abolition of personal income tax (PIT) in exchange for the liquidation of the “Family 800+”, “13th pension” and “14th pension” programs. The applicant is Robert Ołdakowski, who – pursuant to the Act of July 11, 2014 on petitions – requests legislative work aimed at introducing changes to the tax and social system. As the author writes, the petition concerns “abolition of personal income tax (PIT) in exchange for the liquidation of the 800+ programs and additional pensions (“13” and “14”)”. Ołdakowski also requests an introduction “compensation mechanism for local government units due to the loss of PIT revenues”. The purpose of the proposal is maintaining budget neutralitysimplifying the tax system and creating a fairer, universal solution that would benefit all taxpayers.

Financial balance according to data from the Ministry of Finance – liquidation of both sides of the equation as a neutral solution

In the justification, the author refers to official data from the Ministry of Finance and budget analyses, pointing out that the elimination of PIT and 800+ benefits, 13th and 14th pensions would be neutral for the state budget. As the petition says: “Liquidation of both sides of the equation would be neutral for the state budget: PIT revenues in 2024 amounted to approximately PLN 97.6 billion, the total cost of the “800+” programs (approx. PLN 70 billion), “13th pension” (approx. PLN 13 billion) and “14th pension” (approx. PLN 14 billion) amounted to approximately PLN 97 billion, PIT revenues are almost equal to expenses for these three benefits.”

The document indicates that the solution also remains neutral in terms of health insurance premiumsbecause the possibility of its tax deduction was in practice eliminated when the tax-free amount was previously increased to PLN 30,000. The applicant also notes that “introducing appropriate compensation for local government units guarantees the financial stability of local governments” and that “the obligation to have a personal income tax does not result from EU law – it is the exclusive competence of the Member States.” According to the petition’s author, abolishing PIT and liquidating the indicated benefits would not only be financially neutral, but also administratively simpler and more rational from a systemic point of view.

Fairness and universality of the solution – equality in the system and simplification of tax rules

The applicant emphasizes that the current social programs cover only selected social groups – families with children and retirees. Meanwhile, as he states, “abolition of the PIT tax would be a universal solution that would benefit all taxpayers, including retirees and working people raising children.” The author emphasizes that such action would make the tax system simpler, transparent and fairer. The current system – as he points out – contains numerous reliefs and deductions that distort the real level of taxation.

The petition also included a table showing the difference between nominal and effective tax rates:

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• 2022 r.: 1st threshold (income up to PLN 120,000) – 4.13%, 2nd threshold (over PLN 120,000) – 15.58%;
• 2023 r.: 1st threshold (income up to PLN 120,000) – 4.50%, 2nd threshold (over PLN 120,000) – 16.00%.

As we read in the justification, “the effective tax paid by citizens, due to many, even complex, deductions and reliefs, is still significantly lower than the actually existing tax thresholds”.

Ineffectiveness of targeted programs such as 800+, as well as the limited impact of the 13th and 14th pensions

The author of the petition indicates that the “Family 500+” program, transformed into “800+”, has not achieved its main goal, which was to increase the fertility rate. As written: „The “Family 500+” program, currently “800+”, did not lead to an increase in the fertility rate, which was one of its main goals – it is de facto a social program without income thresholds, which by definition conflicts with the idea of ​​social support from the state budget.

With regard to pension benefits, the petition states clearly: „In practice, the 13th and 14th pensions have become a permanent supplement, burdening the budget, with a limited impact on improving the financial situation of some retirees – a common effect is achieved by a PIT tax free amount of PLN 30,000. zloty”. According to the author, these funds could be better used by introducing a permanent solution in the form of abolishing PIT, which would bring real relief to all citizens.

Benefits for citizens and the state – higher net income and reduced bureaucracy

The justification broadly discusses the benefits that abolishing the personal income tax would bring. It was indicated that this solution would ensure:

• higher net income for everyone subject to PIT tax,
• simplification of the tax system,
• reducing bureaucracy and administrative costs,
• increasing the transparency of public finances,
• strengthening the financial independence of citizens.

The document, in the context of benefits for citizens and the state, states exactly as follows: “Greater net income for all citizens earning income subject to PIT, regardless of their family situation. Simplifying the tax system – no annual PIT settlements, reliefs and complicated forms. Reducing bureaucracy and administrative costs. Increasing the transparency of public finances. Strengthening the financial independence of citizens – they would decide to a greater extent about spending their own funds.” According to the applicant, such a solution it would promote economic development and increase social trust in state institutions.

Recommendations regarding local governments – compensation mechanisms and share in VAT and CIT

Recommendations regarding: securing the income of local government units after the abolition of PIT. The author writes: “In order to avoid a loss of local government revenues, the petitioner recommends the introduction of a compensation mechanism in the amount corresponding to the lost PIT revenues, implemented by increasing the local government’s share in VAT and CIT in several total or optional variants”. The proposed mechanisms include:

• Transferring part of VAT revenues to local governments “Mechanism: increasing the share of local government units in the tax on goods and services (VAT) from the current ~46% to e.g. 50-55%. Argument: VAT is a consumption tax – it is a simple mechanism and does not require the creation of new taxes.”
• Fixed share of local government units in corporate income tax “Mechanism: local governments receive a certain percentage of revenues from corporate income tax (CIT), e.g. 10-15%. Argumentation: stable inflow of funds that partially compensates for the lost PIT; in large cities with developed economic activity, CIT revenues may be felt for municipal budgets.”

The petition also contains a proposal to create “compensation fund from the central budget”which would provide annual compensation to local government units in the amount corresponding to lost PIT revenues. The author notes that “the combination of several sources – e.g. 50% from VAT + 10% from CIT + the remaining part from the central budget – causes the compensation to be spread and less sensitive to economic fluctuations in the economy.” The petition also proposes “annual indexation of compensation proportional to GDP growth or inflation”which is intended to secure the stability of local governments in the long term.

Final conclusions – budget neutrality and system stability

At the end of the petition, the author presents the key points of his demand:

1. The abolition of the personal income tax in exchange for the liquidation of the 800+, 13th and 14th pension programs is a solution that is neutral for the state budget, more fair and beneficial to all citizens.
2. The solution significantly simplifies the tax system for citizens by simultaneously eliminating a multitude of complicated tax deductions and reliefs, which are often unclear and require detailed interpretations by tax authorities.
3. The introduction of appropriate compensation for local government units guarantees the financial stability of local governments.
4. The solution eliminates the basic PIT problem related to the lack of indexation of tax thresholds in longer periods of time2, which de facto becomes a regularly hidden tax increase.
5. The solution meets the demands (including electoral ones) of increasing the tax-free amount to PLN 60,000. PLN in a tense budget situation, large deficit and significant military expenditure.