Business-friendly tax law: four major deregulation proposals
For years, the Polish tax system has been one of the largest obstacles to business development. This is not only the opinion of entrepreneurs, but a harsh reality confirmed by international assessments.
In the course of our work, we have identified countless areas where regulation is not so much a hindrance to business as a violation of fundamental principles of social justice and constitutional equality. Following an internal analysis, we have decided to propose deregulatory solutions in four specific areas.
The changes we are proposing are not just another set of theoretical ideas. They are precise, rapidly implementable legislative solutions whose positive effects would be felt quickly by businesses.
In fact, our aim is not a cosmetic improvement of the system, but a real revolution in the relationship between taxpayers and the tax administration. From a model of suspicion and repression to a partnership based on mutual trust and respect for rights. We believe it is worth fighting for.
Additional charge on foodstuffs
Let’s assume that after submitting the CUK-1 return, a trader discovers a small calculation error. He should therefore correct the obvious error as soon as possible. However, it turns out that the system automatically imposes an additional charge of up to 50% of the tax base. And this without taking into account the circumstances of the error. This practice not only violates the principle of proportionality, but also simply discourages entrepreneurs from correcting even unintentional errors.
A taxpayer is treated as a potential fraudster rather than as an honest businessperson who, like anyone else, can make mistakes. However, the current rules can lead to bizarre, unfair and very costly consequences, says Agata Dziwisz-Moshe, Partner and Head of the Tax Practice.
Our solution: We call for the abolition of the additional charge by repealing Article 12i of the Public Health Act. This change will allow businesses to adjust their tax returns without fear, which will benefit everyone: entrepreneurs will be able to adjust their tax returns with confidence, and the budget will benefit because they will be more willing to do so, even if it means paying additional taxes.
Equal treatment in tax audits
Today, different rules and regulations apply depending on whether a company is subject to a tax audit or a customs and tax audit, leading to unequal treatment.
For example, those who have been subject to a customs and tax audit are at a disadvantage because interest on potential arrears is charged without any time limit, even in the case of lengthy proceedings. On the other hand, in the case of tax proceedings, including after a tax audit, interest ceases to be charged three months after the proceedings are initiated. In the case of a customs and tax audit, this limitation never applies, since such an audit – in certain situations – simply transforms into tax proceedings and there is no formal moment of initiation of the proceedings.
And this is a violation of constitutional principles, including the principle of equal treatment.
Our solution: We propose the introduction of a simple rule for the application of Article 54 § 1(7) of the General Tax Code, mutatis mutandis, also in the case of customs and tax audits. This is a quick-win solution that can be achieved by a simple amendment to the regulations, removing the incompatibility with the Polish Constitution and promoting the speed of the procedure.
The regulations once excluded the possibility of applying Article 54 § 1(7) of the General Tax Code in relation to the audit procedure (i.e. the procedure preceding the current customs and tax audit), and the Constitutional Tribunal considered this restriction to be incompatible with the Polish Constitution. The current regulations therefore de facto copy the provisions that had already been declared unconstitutional, says Agata Dziwisz-Moshe, Partner and Head of the Tax Practice.
Right to correct tax returns in any procedure
Another inequality is seen with the right of taxpayers to correct tax returns after an audit procedure has been initiated, which right is lost if a tax procedure is immediately initiated against the taxpayer.
Our solution: Allow entrepreneurs who are subject to tax proceedings to correct their tax returns after the tax authority’s position has been received and considered. The benefit will be a faster completion of the procedure and increased transparency. In our view, this will represent another win for the budget.
Extending the vacatio legis for tax law changes
It may be hard to believe, but Polish companies usually have only one month to adapt to changes in tax law. This is far too short, especially in the case of extensive and complicated tax law changes.
In our opinion, maintaining an adequate vacatio legis is not so much a formal element of the legislative process, but a highly practical solution to accommodate the time needed to learn about and prepare for new requirements.
Our solution: The statutory provision of a minimum 6-month vacatio legis for all acts concerning public levies and the introduction of the principle that changes in tax law always come into force at the beginning of the following calendar year. This change will strengthen citizens’ trust in the State and the laws it enacts.
Changes in the way companies are run, technological progress and the computerisation of tax settlements mean that maintaining the monthly vacatio legis is not in line with the principle of citizens’ trust in the State and the laws it enacts. There is no doubt that a month’s time for getting acquainted with and preparing for new regulations is nothing more than a legal fiction, especially in the case of tax law changes, says Wojciech Śliż, Partner in the Tax Practice.
Advantages of the proposed changes:
- Elimination of unfair sanctions for the correction of tax returns
- Standardisation of the rules for the calculation of interest in different types of proceedings
- Greater flexibility for taxpayers correcting errors
- Predictability of the entry into force of tax regulations
- Establishment of a partnership relationship between the administration and entrepreneurs
- Increased confidence in the tax system
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