The budget bill is considered the foundation of the state’s financial economy. It is not only a legal act containing all projected revenues and expenditures but also the fundamental document for financial management of the state. Consequently, it can be regarded as an indicator of the direction of government policy. Analyzing the provisions of the budget bill allows, on the one hand, to verify the directions of public expenditures, while on the other hand, it enables an analysis of how the government intends to raise funds to achieve its goals.
It is this latter aspect that becomes particularly interesting during the analysis of the assumptions contained in the draft law for the year 2024. It turns out that the government plans to increase budget revenues from almost all taxes. The tool for this is expected to be broadly based changes in tax law.
Budget draft for the year 2024
On August 24, 2023, the Council of Ministers adopted the draft budget for the year 2024[1]. In the justification for the project, we can read that the projected budget revenues will amount to 683,571,962 million Polish zlotys, which represents a significant increase compared to 594,576,738 million zlotys in 2023 and 504,820,801 million zlotys in 2022[2].
The largest share on the revenue side comes from taxes, which according to estimates should amount to 607,790,884 million zlotys. However, it is worth noting that in 2023, according to the budget execution plan, these revenues are expected to reach 525,415,099 million zlotys, while in 2022 they amounted to 465,456,109 million zlotys. Detailed data regarding tax revenues presented in the justification for the budget law for the year 2024 are included in the table below.
Table 1. Tax revenues according to the Justification for the Budget Act for the year 2024 in thousands of Polish zlotys.
| Type of tax | 2022 (thousands zł) | 2023 (thousands zł) | 2024 (thousands zł) | Growth 2022/23 | Growth 2023/24 |
| Value Added Tax (VAT) | 230 390 544 | 259 600 000 | 312 625 000 | 13% | 20% |
| Excise tax | 79 773 438 | 84 500 000 | 88 763 000 | 6% | 5% |
| Corporate income tax | 70 136 603 | 73 000 000 | 78 283 405 | 4% | 7% |
| Personal income tax | 68 107 159 | 89 635 099 | 108 839 479 | 32% | 21% |
| Gambling tax | 3 885 730 | 4 400 000 | 4 700 000 | 13% | 7% |
| Tax on extraction of certain minerals | 3 786 792 | 4 400 000 | 3 700 000 | 16% | -16% |
| Tax on certain financial institutions | 6 078 931 | 5 930 000 | 6 250 000 | -2% | 5% |
| Retail sales tax | 3 296 914 | 3 950 000 | 4 630 000 | 20% | 17% |
| Total tax revenue | 465 456 109 | 525 415 099 | 607 790 884 | 13% | 16% |
Source: Budget Act for the year 2024. Justification., Council of Ministers, Warsaw, August 2023, p. 36.
According to this information, for almost every tax, except for the tax on the extraction of certain minerals, an increase in revenue is projected compared to the current year. The largest revenue, and therefore the largest increase, is noted in the case of VAT and PIT.
Regarding the value-added tax (VAT), the budget bill projects an increase in revenue by over 53.03 billion Polish złoty compared to the current year, representing a growth of about 20%. Revenue from the personal income tax (PIT) is expected to increase by over 19.20 billion Polish złoty, indicating a 21% growth. For the other taxes, revenue growth is projected as follows:
- 4.26 billion Polish złoty (5%) from excise tax;
- 5.28 billion Polish złoty (7%) from corporate income tax;
- 6,00 mld złotych (3%) z tytułu podatku od gier, wydobycia niektórych kopalin (spadek o 16%) oraz podatku od niektórych instytucji finansowych i podatku od sprzedaży detalicznej.
In total, the government aims to gain an additional 82.38 billion Polish złoty from various taxes, which is 16% more than in the previous year.
At this point, it is also worth referring to the data included in the communication regarding the presentation of the draft law. It was indicated that compared to the year 2015, revenues from[3]:
- the value-added tax (VAT) is expected to reach over 186 billion Polish złoty;
- the personal income tax (PIT) will increase by 108.8 billion Polish złoty;
- the corporate income tax (CIT) will rise by 78.3 billion Polish złoty;
- the excise tax will be higher by 88.8 billion Polish złoty.
These data, besides presenting the increase in tax revenues over the past 8 years, also illustrate how significantly the value of taxes collected in the economy is expected to increase in the coming year. A notable example in this regard is the value-added tax (VAT), which is projected to generate revenues higher by 186 billion Polish złoty over the course of 8 years, with an increase of 53 billion Polish złoty – which amounts to over 28% – expected in just one year.
The macroeconomic situation of Poland
Analyzing the issue of tax revenue growth, it is worth taking into account the forecasts for the most important macroeconomic indicators. They allow assessing where the government intends to obtain funds for implementing its policies.
It is worth starting with the most important indicator, namely GDP growth, which – according to the estimates included in the justification of the draft budget law – is expected to be 3%. Among other key indicators relevant to the growth of VAT revenue are[4]:
- private consumption dynamics – 3.3%;
- real increase in fixed asset investments – 4.4%;
- real growth rate of exports – 3.6%;
- real growth rate of imports – reduced by 1.5%.
An extremely important factor in the context of tax revenue growth, especially in terms of VAT, is the inflation rate. In 2023, it is expected to average 12.0%, with a decrease to single-digit values by the end of the year, and then stabilize at 6.6% in 2024[5].
These data, even considering the decrease in the value of money, appear quite optimistic. However, comparing them with data from previous years, where GDP growth exceeded 5%[6] in 2017 and 2018, it can be predicted that they will not be the sole source of tax revenue growth.
Changes in tax law
The justification for the draft budget act for the year 2024, among the sources of increased tax revenues, also points to changes in tax law. In the case of the most significant of taxes, namely VAT, the solutions related to the introduction of the National eInvoicing System (KSeF) are expected to have an impact on increasing revenues. This change – as emphasized by the legislator – is part of a broader process of tightening the tax system, alongside measures introduced in previous years such as Split Payment, JPK VAT with declaration, and online cash registers.
However, it is important to be aware that the introduction of JPK, Split Payment, online cash registers, or KSeF, on the one hand, creates new channels of communication between tax authorities and businesses, thus strengthening the control system. On the other hand, it complicates tax reporting matters. Business owners and managers, as a result of these changes, are forced to compile increasingly more data and information. Moreover, this requires not only a significantly greater investment of time but also expenses for adapting information technology infrastructure, or increased financial and accounting service costs.
However, analyzing the overall changes in tax law may lead to the conclusion that increased revenues will not only be a consequence of the introduction of KSeF. According to media reports, the government’s plans also include other actions, including a thorough reform of the tax code, under which rules for conducting tax inspections and preparing and correcting tax returns will change. As a result of the amendment, tax authorities would gain additional powers to make changes to tax returns ex officio during tax inspections[7]. As a result, tax return corrections would be made ex officio, and the obligation to ensure compliance with tax regulations would lie with the taxpayer.
It is also important to be aware that the aforementioned changes are just one element of much broader efforts to reform the tax system. Examples of these efforts in recent years include the introduction of the Polish Deal, followed by the Polish Deal 2.0, as well as legislation imposing CIT tax on limited partnerships.
Budget and government’s economic and political decisions
The planned increase in budget revenues is related to planned expenditures. In the communication from the Council of Ministers on August 24th, it was conveyed that the budget bill ensures[8]:
- Health care expenditures amounting to 190.9 billion złoty;
- Defense expenditures amounting to 158.9 billion złoty;
- Educational subsidies expenditures amounting to 76.6 billion złoty;
- Pension indexing at 112.3%;
- Financing the so-called 13th and 14th pensions;
- Funds for social programs, especially the 800+ program;
- Implementation of various investment projects including in the areas of healthcare, land transport, culture, and national heritage protection;
- Increase in expenditures in higher education, science, and agriculture.
These pieces of information indicate the main directions of state budget expenditures. Apart from healthcare, defense, and education, there are numerous expenditure items related to implemented social programs.
In this context, it should be noted that the costs of the 800+ program alone may increase from around 40 billion złoty to around 64 billion złoty[9], constituting even 81% of the planned revenues from the corporate income tax. It is worth noting that despite widespread criticism of the government’s actions by the opposition, all major parliamentary parties voted to increase the benefit. The voting results on the draft law amending the law on state aid in raising children are presented in the table below.
Table 2. Voting No. 70 at the 78th Sejm session on the draft law amending the law on state aid in raising children during the third reading.
| Klub/Koło | Liczba czł. | Głosowało | Za | Przeciw | Wstrzymało się | Nie głosowało |
| PiS | 228 | 228 | 228 | – | – | – |
| KO | 126 | 122 | 121 | 1 | – | 4 |
| Lewica | 43 | 42 | 42 | – | – | 1 |
| KP | 24 | 23 | – | 23 | – | 1 |
| Konfederacja | 9 | 8 | – | 8 | – | 1 |
| Polska2050 | 6 | 6 | – | 6 | – | – |
| Porozumienie | 4 | 4 | – | 4 | – | – |
| Kukiz15 | 3 | 3 | 3 | – | – | – |
| LD | 3 | 3 | 3 | – | – | – |
| PS | 3 | 3 | 3 | – | – | – |
| Wolnościowcy | 3 | 2 | – | 2 | – | 1 |
| niez. | 8 | 7 | 6 | 1 | – | 1 |
Source: Sejm Print No. 3413.
Despite the fact that the 800+ benefit program project is the most prominent example of what influences attempts to increase budgetary income through changes in tax law, it is important to remember that this is just one of many such initiatives. Among others, we should mention the 13th and 14th pensions, significant increases in the minimum wage (twice within a year), and the introduction of a system of subsidies for housing loans.
The Act of May 26, 2023, on State Aid for Housing Savings[10], is another example where the project was supported by both leading political parties, with opposition from only a few smaller groups. The results of this vote are presented in Table 3.
Tab. 3. Vote No. 90 at the 74th session of the Sejm on the bill concerning state aid for housing savings.
| Club/Group | Number of members | Voted | For | Against | Abstained | Did not vote |
| PiS | 228 | 225 | 222 | 3 | – | 3 |
| KO | 126 | 123 | 123 | – | – | 3 |
| Lewica | 44 | 42 | – | 28 | 14 | 2 |
| KP | 24 | 24 | 24 | – | – | – |
| Konfederacja | 9 | 9 | – | 9 | – | – |
| Polska2050 | 6 | 5 | – | 5 | – | 1 |
| Porozumienie | 4 | 4 | 4 | – | – | – |
| Kukiz15 | 3 | 3 | 3 | – | – | – |
| LD | 3 | 3 | 3 | – | – | – |
| PS | 3 | 2 | 2 | – | – | 1 |
| Wolnościowcy | 3 | 3 | – | 3 | – | – |
| niez. | 7 | 6 | 5 | – | 1 | 1 |
Source: Sejm Print No. 3096.
Staying within the scope of the influence of legal regulations in the field of social and economic policy, it is worth referring to the example of the Act of March 2, 2020, on special solutions related to preventing, counteracting, and combating COVID-19, other infectious diseases, and crises caused by them[11]. This was one of the legal acts based on which a series of temporary solutions related to the Covid-19 pandemic were introduced. However, despite more than 3 years passing since the first infections occurred, some of these provisions are still in force. Moreover, solutions regarding the limitation of certain types of economic activity, followed by granting significant financial aid to entrepreneurs who suffered due to the imposed restrictions, had a measurable impact on the deterioration of the economy. This resulted in, among other things, a 2% decline in GDP, and also – in the longer term – a high level of inflation, which is currently one of the main challenges for the government. The echoes of decisions related to the pandemic situation are also visible in the current budget project, where this formulation appears several times.
It is worth noting that in this regard, the introduction of the provisions of the COVID law – despite differences in views on social and economic issues – was also based on the votes of the majority of ruling parties. The results of this vote are presented in Table 4.
Tab. 4. Voting No. 7 at the 7th session of the Sejm on the draft law on special measures related to preventing, combating, and combating COVID-19, other infectious diseases, and crises caused by them
| Klub lub/Koło | Number of members | Voted | For | Against | Abstained | Did not vote |
| PiS | 235 | 226 | 226 | – | – | 9 |
| KO | 134 | 114 | 113 | 1 | – | 20 |
| Lewica | 49 | 43 | 42 | – | 1 | 6 |
| PSL-Kukiz15 | 30 | 24 | 18 | – | 6 | 6 |
| Konfederacja | 11 | 10 | – | 10 | – | 1 |
| niez. | 1 | 1 | 1 | – | – | – |
Source: Sejm Print No. 265.
Conclusions
The analysis presented in this article aimed to illustrate the actual direction of the state’s financial economy and, consequently, the implementation of related public policies. The conclusions in this regard can be summarized in several points:
- The draft budget bill foresees a significant increase in budget revenues, mainly due to increased tax revenues, with VAT playing a major role.
- The realization of these goals is not solely determined by the macroeconomic situation but is the result of comprehensive changes in tax law.
- In recent years, numerous changes in tax law have been observed in almost all areas, including PIT (e.g., Polish Deal), CIT (e.g., its application to limited partnerships), excise tax (e.g., increased excise duties scheduled to take effect next year), and especially VAT (introduction of changes in reporting, including JPK, online cash registers, KSeF, and planned changes in the ordinance regarding corrections made ex officio).
- These changes obviously affect the complexity of the tax system, burdening entrepreneurs with additional formalities and complicating tax regulations themselves.
- Tax revenues are allocated to various spheres, including healthcare and defense. Various social programs also constitute a significant portion of total expenditures. Some of them are related to the challenging economic situation caused by the war in Ukraine and the Covid-19 pandemic. The latter aspect is influenced by political decisions made during the pandemic, involving not only the ruling party but also major opposition parties.
- The direction of budget policy regarding the allocation of funds can be considered a somewhat acceptable trend already on the Polish political scene. An analysis of voting results on key projects indicates that despite apparent differences in the implementation of economic and social policies, laws introducing selected programs are adopted not only by the ruling party but also by major opposition parties.
- It should be noted that budget policy, driven by significant expenditure levels, also requires high revenues. Therefore, even if opposition parties oppose the adoption of the budget in a specific form, funds for the implementation of programs accepted by them will still need to be obtained in a certain way. This implies the necessity of maintaining high budget revenues, with tax revenues being the most important component.
In summary, it can be acknowledged that the budget bill proposed by the government sets a certain direction for public policy in terms of financial management of the state. Considering that major opposition parties often lend support to key socio-economic projects of the ruling party, it can be assumed that the direction of their economic, social, and fiscal policies will be characterized by attempts to introduce similar solutions.
[1] https://www.gov.pl/web/finanse/projekt-przekazany-do-rds6
[2] Ustawa budżetowa na rok 2024. Uzasadnienie., Rada Ministrów, Warszawa, Sierpień 2023 r., s. 37.
[3] https://www.gov.pl/web/premier/projekt-ustawy-budzet-na-rok-2024
[4] https://www.gov.pl/web/finanse/rada-ministrow-przyjela-projekt-budzetu-na-2024-rok, Ustawa budżetowa na rok 2024. Uzasadnienie… op. cit. s. 9-18.
[5] Ustawa budżetowa na rok 2024. Uzasadnienie… op. cit. s. 12.
[6] PKB Polski, w: https://data.worldbank.org/indicator/
[7] https://www.prawo.pl/podatki/czynnosci-sprawdzajace-zamiast-kontroli-w-ordynacji-podatkowej,521611.html
[8] https://www.gov.pl/web/finanse/rada-ministrow-przyjela-projekt-budzetu-na-2024-rok
[9] https://www.rp.pl/budzet-i-podatki/art38470631-800-moze-kosztowac-25-mld-zl-wiecej-ekonomisci-to-czysty-populizm.
[10] Dz.U. 2023 poz. 1114
[11] Dz.U. 2020 poz. 374