Poland on Thursday scrapped its personal income tax for young employees earning less than $22,000 a year, as part of a drive to reverse a brain drain and demographic decline that’s dimming the prospects of a country otherwise experiencing strong economic growth.
A new law by the right-wing government took effect Thursday, slashing the personal income tax from 18 percent to zero for workers who are under the age of 26 and who are below the income threshold. The move is expected to boost the earnings of nearly two million Polish people at home – and the government hopes it will also persuade young Poles working abroad to return to the Eastern European country.
Prime Minister Mateusz Morawiecki said he hoped that eliminating that tax would “prevent a further loss, a bleeding of the population that is especially painful for a nation, a society, when it concerns the young generation.”
But there were strong doubts about whether the tax relief would stop the drain of talented and educated young Poles to London, Berlin and other cities that offer higher wages and other opportunities.
“I do not think it would stop me and my peers from leaving,” said Paulina Rokicka, a 19-year-old in Warsaw who works part time at a television station. “It seems to me that we will want to leave [anyway] because there are better perspectives abroad than in Poland.”
Introduced before fall parliamentary elections, the exemption is part of a larger package of social benefits that has earned the government strong voter support – but raised worries about strains on state finances. The new social benefits include cash bonuses to families with children and a one-off payment to retirees.
Morawiecki said that around 1.5 million Poles – a number comparable to the population of Warsaw – have emigrated since the nation of 38 million joined the European Union in 2004. Other estimates have put that number at two million, but the figure is hard to pin down because of the large number of people who go back and forth.
While wages still are far lower in Poland than in the West, the country’s economy is growing at around 4.5 percent, and unemployment had dipped below six percent. In order to fill labour shortages, companies have turned to hiring migrants – mostly Ukrainians, about two million of whom are now estimated to be working in Poland.
The government says it is focusing on innovation where young inventive minds are highly valued. Morawiecki recently urged a gathering of young people to “stay here, to take your future in your own hands and be enterprising”.
The government estimates the programme will cost the budget around two billion zlotys ($519m) a year.
Finance Ministry spokesman Pawel Jurek told The Associated Press on Thursday that young Poles will now have more money left in their bank accounts to allow them to start families earlier. But he said the most important aim is to keep professionals in the country.
Maciej Biernacki, another young employee in Warsaw, also voiced doubts that the tax relief would sway many people, calling it only “one small” element that would be considered in people’s life decisions. More important, he said, are issues like business predictability and how the country is run.
“I doubt that this kind of exemption would make anyone stay here in the country if he hesitates about whether to leave or stay,” the 25-year-old public relations manager told the AP.
A recent survey by the National Bank of Poland showed that about 15 percent of Polish emigres would be willing to return home, especially from Britain, where the prospect of a hard Brexit threatens economic pain.