Setting business free
Poland Today editor Andrew Kureth sits down with Andrzej Malinowski, president of advocacy group Employers of Poland, to talk about the challenges facing Polish businesses
Employers of Poland (Pracodawcy RP) is campaigning to change how tax authorities treat entrepreneurs and taxpayers in general. What would you like to see changed and how would such changes benefit Poland’s economy?
Changing tax policy in Poland is one of the priorities of Employers of Poland. It would be unfair to say that policy-makers are not doing anything to rectify the tax system. However, the changes are often only temporary and occur far too slowly. In addition, solutions favourable to taxpayers are often adopted only because we are obliged to implement directives and recommendations of the European Union. There is no will and courage to make bold changes.
I wish that, after 25 years of a market economy in Poland, the tax authorities would finally stop treating entrepreneurs as potential fraudsters. I wish their rights were respected, so that they could concentrate on running their businesses, developing them and creating new jobs. Simplifying the tax system and changing the tax administration’s approach to taxpayers would enable existing businesses to develop and new ones to be established. This would be a win-win, since it would benefit the Treasury, entrepreneurs and ordinary citizens. We are an extremely entrepreneurial nation and therefore the state should introduce legal and tax solutions creating conditions in which Poles could spread their wings, pursue their goals and dreams, which obviously will affect the public welfare.
Other than taxation issues, what do you consider the biggest challenge currently facing employers in Poland?
One of the biggest challenges facing employers in Poland is an increasing difficulty in recruiting suitably qualified staff. This is a matter of changing the education model so that it meets labour market needs. Otherwise, graduates will be unemployed while employers still struggle to find staff they need. To grow and to be competitive, we need to treat financial expenditures on personnel primarily as an investment, not just costs. We really need broader and closer cooperation between business and schools, especially vocational schools. It is also necessary to support the development of human capital and increase awareness of how important good human resources management is.
What is the most important change you would like to see made in Polish regulations?
All of the changes expected by Polish businesses concern reducing pervasive formalism, taming bureaucracy, and enacting rules that are not highly questionable in their application. The degree of complexity in Polish law is not conducive to building mutual trust between the state and entrepreneurs.
What can be done to encourage Polish companies to invest more in R&D and innovation?
Ratings clearly show that the Polish economy as a whole and individual companies are not as innovative as we would like them to be. In the European Commission’s Innovation Union Scoreboard we are only ahead of Romania, Bulgaria, Latvia, and Lithuania. That is bad. We need an overhaul of the playing field. I am talking both about changes in the law that will make investment in research and development attractive in terms of taxation and about facilitating access to financing for micro and small companies. We have many start-ups with great business ideas and all they need are the right conditions. We have to create a whole ecosystem for innovation, focusing in particular on commercialization and cooperation between science and business.
These are grassroots processes now as policy makers have not fully grasped how serious the problem of our low innovation level is. They should bear in mind that innovation allows you to sell your goods or services with a higher margin, which then enables moving up to the next stage of economic development. This has a fundamental impact on the whole economy, providing not only for its dynamic development but also a significant increase in wages, and therefore in the wealth of the society. The advancement of civilisation depends on innovation. We hope the new EU budgetary perspective will enforce some processes even against the administration.
In 2007 few people believed that Poland would manage to build any highways, and today some of them are of better quality than the German ones. I hope the same process will take place in terms of innovation and strengthening cooperation between business and science, so that by 2020 we will be proud of the number of new patents. One thing I know for sure – Polish entrepreneurs have huge potential and they can unlock it by themselves as long as the administration does not get in the way.
‘I wish that, after 25 years of a market economy in Poland, the tax authorities would finally stop treating entrepreneurs as potential fraudsters’
You have criticized the government for not choosing Poland-based manufacturers to provide 70 new helicopters for the Polish military. Are quality of equipment and Poland-based production the only criteria the government should use, or should geopolitical concerns be taken into account as well?
The government plans about 130bn złoty in expenditures on armaments. This is a huge amount of money that should go to Polish industry if possible. Buying foreign products with Polish taxpayers’ money when the same – or better – quality products can be made in Polish plants, is acting to the detriment of the economy. Most Poles agree with that, as opinion polls show. In countries such as France or Germany it is inconceivable that domestic companies are not the first to be considered.
Of course, we should also take into account the geopolitical situation and our membership in NATO. I am convinced, however, that there is no contradiction here, and you can reconcile those two criteria – geopolitical and economic factors. Without a doubt, we should increase the potential of Polish armaments companies during the planned process of modernisation. The aim of this action is that in a few years, perhaps a decade, Polish companies will be able to not only to meet most needs of the Polish armed forces but also effectively compete for contracts abroad. It is simply a matter of our national interest. Such is contemporary patriotism.
Is the emigration of so many young, educated Poles an overall negative or an overall positive? How should this issue be addressed from the side of policymakers? Do Polish employers have a role to play in stemming the tide?
At the end of 2013 the number of Poles temporarily residing outside Poland was estimated at approximately 2.2 million people, not counting emigration prior to joining the EU. At the same time the number of immigrants in relation to the total Polish population remains at one of the lowest levels in the EU and is approximately 200,000 people. If emigration and immigration balanced each other, we would consider them as enriching our labour market with international experience and stimulating entrepreneurship. Unfortunately, at the moment there is no indication that we might expect massive returns of Poles. And no one has an idea how to change this situation.
There are at least a couple of problems stacked together here, so there is no single solution. Poles aren’t leaving because they can’t find a job in Poland, but rather because they want a job that is better paid and better suited to their qualifications, and because they want a higher standard of living. With this in mind, we must conduct reforms in many areas. We need a comprehensive and rational family policy, housing policy, regulations conducive to cooperation between science and business, investment in human capital and entrepreneurship, real support for entrepreneurs from state institutions, and health care reform.
Additionally, it is important to remember about a proper migration policy, which in our situation should focus on the labour market.
What do you think will be Poland’s greatest economic advantage over the next several years?
Poland has many strengths, but uses them poorly. In my opinion, our greatest asset is our absolutely remarkable entrepreneurial spirit. Its explosion could be seen best a quarter of a century ago, when we began the transformation. Despite many obstacles, Poles are still one of the most creative and entrepreneurial nations in the world.
If in fairly difficult legal and regulatory conditions we can surprise the world with interesting ideas, imagine what we would be capable of in a more friendly environment. If we free entrepreneurship from the fetters of bureaucracy and provisions incompatible with the socio-economic conditions of the 21st century, if the tax administration does not persecute brave people running their own businesses, we can – as the saying goes – move mountains.
“I wish that, after 25 years of a market economy in Poland, the tax authorities would finally stop treating entrepreneurs as potential fraudsters. I wish their rights were respected, so that they could concentrate on running their businesses, developing them and creating new jobs. Simplifying the tax system and changing the tax administration’s approach to taxpayers would enable existing businesses to develop and new ones to be established,” says Andrzej Malinowski, president of Employers of Poland (Pracodawcy RP).
EMPLOYERS OF POLAND
Employers of Poland (Pracodawcy RP) is the oldest and largest organisation of employers in Poland, according to its website. The group has accompanied Poland’s political and economic transformation since 1989 by representing the interests of Polish entrepreneurs from all sectors and businesses. The organisation brings together more than 10,000 companies employing around five million people.