This week, the “Rzeczpospolita” daily reported on concerns in the modern business support services industry, related to the Council of Ministers’ adoption of the 2020 Budget draft, which included the infamous abolition of the 30-times-average-salary cap on social insurance contributions (ZUS). This change will undoubtedly hit the earnings of the highest earners, i.e., specialists in finance or IT, who work in large numbers in service centers located in our country, providing support for global corporations.
Competing for the Rich
While I would not expect sudden moves related to this, I would certainly expect quiet but well-thought-out decisions from enterprises with international scale of operations. Above all, one must realize that there is strong competition in Europe regarding tax incentives aimed at attracting qualified, well-paid specialists. In April 2019, the Greens/EFA Group in the European Parliament published an extensive summary comparing how individual EU countries compete with tax incentives for top earners, under the telling title “Competing for the Rich.”
The Netherlands is an excellent example of such targeted tax competition. Since 2012, the so-called 30% ruling has been in effect there – a tax privilege for highly qualified workers from abroad that allows 30% of their gross salary to be treated as a tax-free allowance. This means that the effective income tax rate for such a specialist is significantly lower than the standard rate.
This is one of the key instruments attracting specialists from all over the world to the Netherlands, particularly in the technology, financial, and scientific sectors. The Dutch approach is pragmatic: attract the best, give them favorable conditions, and benefit from their contribution to the economy.
Poland, meanwhile, is going in the opposite direction. Instead of creating incentives, it is introducing additional burdens on the highest earners. This may have long-term consequences for the competitiveness of the Polish economy in the fight for international talent.
Paweł Osiński
Attorney, expert in international corporate law