Poland to scrap income tax for young workers

Warsaw, Poland – Poland has moved to exempt young workers from paying the income tax.

Poland approves income tax break for under-26 young workers

Last week, the lower house of Parliament approved a measure, introduced by the ruling Law and Justice (PiS) party, to exempt workers under the age of 26 from the income tax.

More precisely, the move would exempt an estimated 2 million young workers from paying the 18% income tax for those who earn less than 85,500 zlotys (around 20,000 euros) per year. Young entrepreneurs who founded and own their companies, however, won’t benefit from the tax cut.

To come info force by August 1 as expected by its supporters, the measure still has to be approved by the upper house of Parliament and signed into law by President Andrzej Duda.

According to the government, the measure should cost around 2.5 billion zlotys (approximately 590 million euros).

Making Poland more attractive for young workers abroad

A campaign promise of the ruling conservative Law and Justice party, the law to exonerate young workers from paying the income tax is meant to stem the flow of Polish youth leaving the country to find better paid jobs elsewhere, including in Germany and the U.K. One of the ruling party’s pledge is also to lure back young Poles who have already left or are currently finishing their studies abroad.

Nearly 2 million people have left the country for other EU countries since Poland joined the bloc in 2004, according to estimates.

“For the past 30 years, Poland has demanded too much from young people and has not helped them enough. Employers were not ready to raise salaries of their young workers, so we are doing it through abolishing the income tax”, Polish Prime Minister Mateusz Morawiecki said.

According to Finance Minister Marian Banaś, “reducing the costs of employing people on relatively low wages will allow young people to have an easier start on the job market and people working ‘off the books’ to return to the mainstream job market”.

Addressing Poland’s labour shortages and demographic decline

The mass emigration of its working-aged population is one of Poland’s most pressing challenges, and only heightens current labour shortages while posing a significant long-term demographic risk. According to U.N. predictions, the total population of Poland could drop by a staggering 40% by 2050.

This new tax break for young Poles is part of the government’s wider social spending program – that includes the extension of the child benefit program, higher pensions and tax free allowances – pledged by the ruling party ahead of national elections this fall.

Income tax break: a “populist” measure to bribe voters?

Opposition and critics accuse the government of buying people’s votes with “populist” measures and reckless spending. Talking to the Financial Times, Iga Magda from Poland’s Institute for Structural Research said that the move didn’t address the main challenges to young people entering the labour market.

“The real issue is mainly unsuitable qualifications and, in particular for women, not enough state support for combining work with family life”, she said. “From the point of view of the labour market, it would make more sense to invest in long-term solutions addressing those problems”.