Poland has most unicorns in CEE… but second worst tax system in OECD
The CEE’s startup scene has transformed from a chaotic backwater at the turn of the millennium to an increasingly organized and dynamic set up today. Poland is at the heart of the scene, led by companies such as InPost and CD Projekt.
Poland has most unicorns in CEE
Poland has eight ‘unicorns’ (startups worth over USD 1 billion), the most in the CEE region, according to “Coming of Age: Central & Eastern Europe Startups”, a report by Google For Startups, Atomico – a European venture capital firm, and Dealroom.co – the Amsterdam-based data and intelligence firm. Estonia comes 2nd with six, followed by Czech Republic and Ukraine with four each. 34 unicorns have been created in CEE to date, up from just six in 2015.
In terms of cumulative value of startups founded after 2000, Estonia is in the lead at EUR 32 billion, Romania 2nd at EUR 27 billion – although the lion’s share, with EUR 25 billion, is taken by one company, global software provider UiPath, with Poland coming in 3rd position at EUR 25 billion.
When it comes to the most valuable tech companies founded in CEE after 2000, UiPath leads the field, started in Romania in 2005 but now headquartered in the US. 2nd is Estonia’s Wise (formerly TransferWise), founded in 2011, valued at EUR 14 billion and now based in the UK. Poland’s most valuable startup is InPost in 3rd position, founded in 2006 and valued at EUR 8.4 billion. The company remains based in Poland. In 4th place is Skype, founded in Estonia in 2003, now HQ’d in the US and worth EUR 7.6 billion, and in 5th position comes software development company JetBrains, founded in Czech Republic in 2000 and now worth EUR 6.4 billion. The remaining five in the top 10 are: Ukraine’s Gitlab (now in the US), Poland’s CD Projekt (Warsaw-based), Estonia’s Bolt (remaining in Estonia), Hungary’s LogMeIn (now in the US) and finally Lithuania’s Vinted, which remains based in Lithuania.
Companies founded in CEE, says the report, now have a combined enterprise value of over EUR 186 billion, up 19 times since 2010. 2021 has seen record venture capital investment: “VC investment in CEE-founded companies has already smashed previous records with €4.0B already raised in 2021. At this pace, 2021 would see a growth of 2.3x from the previous all-time-high in 2019.” Investment growth in CEE has been driven mostly by foreign investors, who account for 90% of the funding since 2017. CEE’s particular strength, according to the report, lies in enterprise software, which attracts more than 2 x the share of VC funding than in the rest of Europe. Within enterprise software, process automation, developer and collaboration tools, software development, cybersecurity and marketing & sales have created EUR 90 billion of the EUR 96 billion value in the CEE region.
Concerning where the companies are based once they take off, the report acknowledges that “a common narrative is that CEE-born startups tend to relocate overseas, but some of the region’s biggest ecosystems are retaining their startups. Most CEE-born companies,” it continues, “which have relocated, also still retain a large proportion of their employees in CEE, usually around 50-90%.”
Polish tax system second-worst in OECD
Poland comes in 36th position out of 37 in the OECD for its tax policy, beaten to the lowest spot only by Italy – according to the annual International Tax Competitiveness Index (ITCI) published by Washington DC-based think tank The Tax Foundation. The ITCI “seeks to measure the extent to which a country’s tax system adheres to two important aspects of tax policy: competitiveness and neutrality.”
Concerning Poland’s tax system, these are the main findings of the report:
Poland has a below-average corporate tax rate of 19% (OECD average is 22.9%).
Poland’s taxes on labour are generally flat, allowing the government to raise revenue from taxes on workers with relative low efficiency costs.
Poland has a broad tax treaty network including 85 countries.
Poland has multiple distortionary property taxes with separate levies on real estate transfers, estates, bank assets, and financial transactions.
Companies are severely limited in the amount of net operating losses they can use to offset future profits and are unable to use losses to reduce past taxable income.
Companies can only write off 33.8% of the cost of industrial buildings in real terms (the OECD average is 50.1%).
Poland came bottom in Consumption Tax, which is a tax that applies to sales of goods or services. There are three main types of consumption taxes: sales taxes, value-added taxes (VAT), and excise taxes. While sales taxes and VATs usually apply to a broad set of goods and services, excise taxes are targeted at specific products.
According to Business Insider, “the index does not take into account the aspect that is particularly acute for Polish taxpayers – the volatility of regulations and the uncertainty related to their adoption. Tax regulations in Poland are modified every now and then, which officially is often aimed at “filling” the gaps.”
Estonia has the best tax code in the OECD for the 8th year running, says the report, due to four positive features: a tax rate on corporate income that is only applied to distributed profits, a flat 20% tax on individual income that does not apply to personal dividend income, a property tax that applies only to the value of land, rather than to the value of real property or capital, and a territorial tax system that exempts 100%t of foreign profits earned by domestic corporations from domestic taxation, with few restrictions.
Overall, the top five countries, in order, were: Estonia, Latvia, New Zealand, Switzerland and Luxembourg.
The bottom five countries, starting with the worst, were: Italy, Poland, France, Portugal and Mexico.
Government simplifies work permits for foreigners
The government has adopted a bill intended to be a response to the lack of workers in Poland’s labour market, writes Business Insider. The bill was prepared by the Ministry of Internal Affairs and Administration and aims to simplify the procedure for legalizing the stay of (non-EU) foreigners in Poland, especially in the case of combined residence and work permits – the most frequently granted type of temporary residence permits.
Foreigners will no longer need to have a secured place of residence, and the requirement to have a stable and regular source of income for the purpose of granting a temporary residence and work permit will also be lifted. Instead, the applicant is required to receive remuneration not lower than the minimum wage, regardless of the working time and the type of legal terms on which he or she is to perform work.
“Oh my god. I don’t know what to say” – Canadian wins 18th International Chopin Piano competition
24-year-old Canadian Bruce Liu, a graduate of the Montreal Conservatoire, has won the 2021 Chopin Piano competition. The Paris-born pianist has performed with major ensembles including the Cleveland Orchestra, Israeli Philharmonic Orchestra, Montreal Symphony Orchestra and Orchestra of the Americas, and has toured with the China NCPA Orchestra in North America. “Oh my god. I don’t know what to say, honestly,” Liu said after being named the winner. “Being able to play Chopin in Warsaw is one of the best things you can imagine, so I’m truly honoured for this award, and for this jury’s trust and for all the warmth I have received in recent days,” he said.
Jury head Katarzyna Popowa-Zydron said after the announcement that the level of the pianists was very high and made the award decisions very hard for the 17 jurors. She called the participants “wonderful young people.”
The competition, held in Warsaw, was initiated in 1927 and has been held every five years since 1955. It is organised by the National Institute of Fryderyk Chopin, with the winner receiving a cheque for EUR 40,000.
Business news compiled by Poland Today from Polish media and original sources