REVIEW #12: Taxation of Labor and Capital in Poland: Recent Trends and Challenges

The majority of people around the world complain about taxes they have to pay. However, in the case of Poland, it is not only the size of the tax burden that poses a problem, but also complicated and unclear rules in place. In theory, particular levies can be easily classified as: taxation of consumption, of capital, or of labor. In practice, the distinction is often not so clear.

Furthermore, official labels of different levies (in particular, taxes and social security contributions) are sometimes used in a misleading way. Such inconsistencies create serious problems for the Polish tax system, encouraging taxpayers to arbitrage, which provokes unnecessary disputes with tax administration.

Therefore, the system needs to be reformed. The only question is: how?

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Overview of the Polish Tax System

The main source of public revenues in Poland are indirect taxes (levied mainly on consumption) and social security contributions (levied on labor). In 2018, tax revenue in Poland amounted to 35% of GDP. This included:

  • 14.3% of GDP from indirect taxes. The most important ones were VAT (8.1% of GDP) and excise (3.4% of GDP), both levied on consumption;

  • 13.3% of GDP from social security contributions. Formally, social contributions are divided between employer and employee, and some of them are even paid by pensioners (healthcare contribution, which is included in this category), but, in reality, in the long run they are paid by workers1;

  • 7.8% of GDP from direct taxes, with PIT (5.3% of GDP) being by far the most important, followed by CIT (2.1% of GDP).

Overall, the tax burden in Poland is higher than in the majority of regional peers. Although it is below the EU average of 36.7% of GDP, it should be noted that more affluent countries with large government expenditure drive this result to a large extent.

Poland, with its aspiration for faster economic growth, should be compared with its regional peers that are at a similar level of development.

Within the region, Polish taxes are well above average, substantially higher than in Bulgaria, Romania, Latvia, Lithuania, Estonia, and Slovakia.


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1 See an overview of 52 empirical studies on this subject by González-Páramo and Ángel Melguizo (2012), who conclude that after market adjusts, nearly whole social security contribution is actually paid by workers. Available [online]: