Poland asks Brex­it­ing bankers to pay higher taxes

The Pak Banker - - FRONT PAGE - WAR­SAW -REUTERS

After Bri­tain voted to Brexit, Pol­ish lead­ers lust­fully eyed the thou­sands of fi­nance jobs that might leave Lon­don, ex­pect­ing banks to em­brace their coun­try for its ea­ger young work­force, in­ex­pen­sive of­fice space, and fast-grow­ing econ­omy.

Now, Poland is ad­ding a less wel­com­ing el­e­ment to the pitch: higher taxes for many of the peo­ple who might fill jobs im­ported from the UK.

The lower house of par­lia­ment on Nov. 24 ap­proved a bill that would re­move a cap on so­cial se­cu­rity con­tri­bu­tions for salaries top­ping 127,890 zloty ($36,000) per year, sad­dling them and their em­ploy­ers with ad­di­tional levies. That could boost costs for banks such as JPMor­gan Chase & Co, UBS Group AG and Gold­man Sachs Group Inc. that have said they'll shift some op­er­a­tions to Poland.

The pro­posal is "a red light" for com­pa­nies con­sid­er­ing in­vest­ments in the coun­try, ac­cord­ing to the As­so­ci­a­tion of Busi­ness Ser­vice Lead­ers, an in­dus­try group whose mem­bers -- in­clud­ing Google, HSBC Bank Plc, and Or­ange Poland SA -- em­ploy more than 150,000 peo­ple in Poland. The as­so­ci­a­tion said the law would af­fect about a third of its com­pa­nies' em­ploy­ees in jobs such as ac­count­ing and tech­nol­ogy and more than 60 per­cent of those in re­search and de­vel­op­ment.

The or­ga­ni­za­tion says the bill is be­ing im­ple­mented too hastily, with the pro­posal sur­fac­ing only in Oc­to­ber, after many com­pa­nies had pre­pared their fi­nan­cial plans for 2018. The hurry-up sched­ule is "proof that the govern­ment is ig­nor­ing the needs of en­trepreneurs who cre­ate valu­able jobs," the group said in a state­ment.

The bill must be ap­proved by the Se­nate, which re­con­venes on Dec. 5, and signed by Pres­i­dent An­drzej Duda, who hasn't yet weighed in on the is­sue. In pre­sent­ing the mea­sure to par­lia­ment, the La­bor Min­istry said it would in­crease fair­ness in so­ci­ety and "ease ten­sions cre­ated by the mar­ket econ­omy."

Deputy La­bor Min­is­ter Marcin Zie­le­niecki said it was im­por­tant to get the law on the books in time to be im­ple­mented for 2018. And he said busi­nesses will be able to ad­just be­cause in early months so­cial se­cu­rity charges will be de­ducted as usual, so "most of the im­pact will come in the sec­ond part of the year."

The new levy would af­fect the top 1.4 per­cent of Poland's 25 mil­lion tax­pay­ers, ad­ding 29 bil­lion zlo­tys to pub­lic cof­fers over the com­ing decade as the coun­try's $470 bil­lion econ­omy grows at the fastest pace since 2011, the La­bor Min­istry fore­casts. The govern­ment is scram­bling to se­cure funds for wel­fare pro­grams such as in­creased sub­si­dies for child care and a de­crease in the re­tire­ment age from 67 to 65 for men and 60 for women.

For a depart­ment head at a bank mak­ing $75,000 per year, the change would mean $2,921 in ex­tra so­cial fees and other charges and cost the em­ployer $6,317 in ad­di­tional pay­roll taxes. For those earn­ing 1 mil­lion zloty ($281,825) gross per year, the new rules would cost the em­ployee and the com­pany a com­bined $58,775.

"This kind of reg­u­la­tory change is desta­bi­liz­ing," said Rafal Ko­zlowski, chief fi­nan­cial of­fi­cer Asseco Poland SA, the coun­try's largest soft­ware maker. He said the law would add as much as 9 mil­lion zlo­tys to Asseco's an­nual la­bor bill of about 370 mil­lion zlo­tys -- a cal­cu­la­tion that doesn't in­clude the ex­tra taxes his em­ploy­ees will face.

The mea­sure threat­ens the govern­ment's goal of lur­ing jobs from Lon­don after Bri­tain leaves the Euro­pean Union. In Jan­uary, Deputy Premier Ma­teusz Mo­raw­iecki said Poland could at­tract as many as 30,000 Bri­tish jobs to its busi­ness-ser­vice sec­tor this year alone. Mo­raw­iecki, who also serves as fi­nance min­is­ter, in Oc­to­ber said the govern­ment was in the "fi­nal stage of ne­go­ti­a­tions" with two global banks on mov­ing op­er­a­tions to Poland.

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