NEWSLETTER
From Poland With Love – January
Topic of the Month
Bad Deal
The Polish Deal was a new socio-economic programme of PiS for 2021-30. It was announced in May (read more in the May 2021 edition) and approved by the government in September 2021, before coming into force at the start of 2022. The opposition, the Senate and many economists warned against the speed of the introduction of such a big fiscal reform that, in their opinion, requires much more preparation and a proper information campaign. However, the government was eager to start the programme as soon as possible and use it as the key element of its campaign before the 2023 general elections. Prime minister Morawiecki believed that Polish Deal will boost Poland’s development, and claims that most Poles will either benefit or not be affected – 18 million people (out of 27 million taxpayers) will benefit from the changes, while 9 million will stop filing out tax forms altogether, as they will no longer pass the threshold.
The key changes of the Polish Deal are as follows:
- The tax-free amount of PLN 30.000 was introduced for all taxpayers who reconcile their income according to the progression.
- The annual earnings threshold for entering the bracket for the highest income tax rate of 32% has been raised to PLN 120.000. Additional tax allowances are available to married couples as well as families with at least four children.
- Elimination of the possibility of deducting health insurance contribution from tax. (This change will affect all individuals who are obliged to pay health insurance contributions. In the case of employees, a special relief has been introduced to eliminate the negative impact of the change. However, the relief will only apply to employees with annual employment income up to PLN 133.692.)
- New minimum income tax. The minimum tax rate is 10% of the tax base and will be deductible from the regular corporate income tax (CIT). (It will affect most Polish corporate payers: incurring operating tax loss or with operating profitability below 1%.)
- It will be easier to apply the deferral of CIT to the moment of distribution of dividends in companies having no subsidiaries, wholly owned by individuals. The aggregate taxation of both CIT and personal taxation may be in the range of 20–25% depending on turnover.
- Changes in calculation of the health insurance contribution for sole entrepreneurs. (In principle, will increase the costs of obligatory burdens.)
- Flat rate tax on turnover for private entrepreneurs and some partnerships
- Reduction of lump sum tax rates on recorded revenues (e.g. for those performing IT services to 12% from 15%.)
- Health insurance contribution on remuneration of management board members.
- Rental income taxed only under lump sum taxation rules.
Among the beneficiaries are an estimated 90% of pensioners, who receive up to PLN 2.500 every month for their retirement. Those who chose to continue working and not claim a pension, despite being of eligible age, will not pay income tax.
Nevertheless, January showed the real face of the Polish Deal. Some professional groups, including lower earners and public sector employees who receive upfront payments and pensioners realized that their payouts are lower than in 2021. The introduction of a complex new tax system created widespread confusion and dissatisfaction.
Prime minister Mateusz Morawiecki tried to save the situation. He admitted some minor mistakes and promised that compensating payments would be made in the coming weeks. A special bill approved on January 25, obliging employers to calculate the advance payments of their employees’ income tax in 2022 according to both the old and the new system, placing an additional burden on employers. This made the situation even more challenging for Polish companies, employees and entrepreneurs.
Tax advisors keep finding new loopholes and errors in the PiS flagship programme. Almost every day new paradoxical findings are being announced. Even employees of the Social Insurance Institution (ZUS) appealed to stop the reform when they saw their paychecks in late January. Also MPs were victims of the new system, but this problem was solved by a very creative interpretation by the Chancellery of the Sejm and politicians will not lose a single zloty.
This chaos coincided with continuous problems with high inflation and record-breaking prices of energy and gas. A recent survey conducted for Polityka weekly magazine found that when asked what issue Poles were most anxious about the most common answer was inflation and price increases (47%). The opposition has seized on the topic running multiple campaigns that say “PiS=drożyzna” (PiS=high prices).
The political damage has been done, particularly for the prime minister and his closest circle. It has been commented that Jarosław Kaczyński is furious and Morawiecki’s days in the cabinet are numbered. But it is not so easy. Kaczyński said the problems that arose at the beginning of the introduction of the Polish Deal require political decisions, including personnel ones. Poland’s finance minister Tadeusz Kosciński has already resigned. This is the official version, in reality nobody has any doubts that he was forced to quit by the PiS leadership. “At the end of the day, I am the captain, I take responsibility,” Kosciński said. But the real captain, Mateusz Morawiecki, is still fighting for his position and heads of his closest advisors and deputies, as his opponents in the United Right do not stop criticizing him in public (in particular Zbigniew Ziobro and his Solidarity Poland party). How will it end? We will see developments in February.
Politics
Another Victim of the Abortion Ban
Another Polish woman lost her life due to the nearly full abortion ban. 37-year-old Agnieszka T. from Częstochowa died of sepsis related to a foetal illness.
Agnieszka was pregnant with twins. One of her foetuses died on December 23, but doctors in a hospital decided to wait and see if they could save the second foetus. They waited eight days. The dead of the second foetus was followed by death of the women herself.
In September 2021 Izabela from Pszczyna died of septic shock in a hospital in south of Poland. Doctors did not perform an emergency abortion to save her life even though she was miscarrying (read more in the September 2021 issue). In addition, more women have reported difficulties with antenatal testing, which is also being performed in significantly fewer numbers since the Constitutional Court’s decision to ban abortion.
The new abortion law took effect exactly one year ago, on January 27, 2021. It has had a devastating impact on the lives of women and all those in need of abortion care. So far, more than one thousand women have turned to the European Court of Human Rights (ECtHR) in an effort to vindicate their rights, challenging the cruel law. The applicants claim that the Polish abortion law causes them grave harm and violates their rights to privacy and freedom from torture and other ill-treatment.
Nine leading international human rights organizations have filed third-party interventions to the ECtHR in these cases: Amnesty International, the Center for Reproductive Rights, Human Rights Watch, the International Commission of Jurists (ICJ), the International Federation for Human Rights (FIDH), the International Planned Parenthood Federation European Network (IPPF EN), Women Enabled International, Women’s Link Worldwide, and the World Organisation Against Torture (OMCT). “Restrictive abortion laws such as Poland’s are contrary to international and European human rights standards and public health guidelines. They compromise women’s freedom, dignity, health, and lives. Our organizations’ interventions seek to highlight critical human rights aspects of such restrictive laws, and we are proud to support efforts to hold Poland accountable for these ongoing human rights violations,” the organizations declared.
Polish doctors are now living in fear of providing their patients with the full range of reproductive care. These health services that should be provided by the state are now given – limited resources taken into account – by NGOs and human rights groups, both from Poland and aboard.
Ultra-conservative organizations together with the catholic church are pushing a legislative initiative that would ban terminating a pregnancy even if it results from rape, incest or if the mother's life is in danger. It is difficult to imagine that such draft could be supported in the Polish parliament but it will be a part of the public discourse covering scandals in the government.
Confederation Banned from Facebook
Facebook fanpage of the Confederation, Polish far-right grouping with 11 MPs representation in the Sejm, was removed from the platform for spreading Covid-19 disinformation.
Polish government officials called on Meta to reinstate the account and called the move "a violation of the constitutional principle of freedom of information and interference in the forthcoming election cycle".
European Affairs
Morawiecki in Madrid. With Le Pen, Orban, Abascal…
Prime minister Mateusz Morawiecki attended another summit of far-right leaders, organized by the Spanish VOX party, which took place under the slogan “Defend Europe”. This time ultra-conservative and right-wing populist politicians, among others Hungary’s prime minister Viktor Orban, Marine Le Pen and Santago Abascal, met in Madrid.
They pledged to work more closely in the European Parliament together on migration, but the topic the aroused the most interests was Russia.
“Russia's actions have been unequivocally condemned in the final declaration adopted by today's meeting,” Morawiecki said. This is not entirely true as Le Pen’s signature is missing under the statement. Morawiecki also stressed he had been attending meetings with many European politicians and parties to explain Poland's attitude towards Russia “as many politicians in Europe, who live several thousand kilometres from Russia, are not aware of a real threat and want to treat Putin as a rational and responsible partner.”
Polish democratic opposition condemned Morawiecki’s trip to Madrid. Donald Tusk had demanded that Mateusz Morawiecki denied reports he planed to take part in a meeting of “an anti-Ukrainian and pro-Putin international” in Spain. In response, Morawiecki called on Tusk to resign as president of the European People’s Party due to its role in allowing the development of Nord Stream 2.
Morawiecki believes that the attendees of the event in Madrid “have shown that there is a different future for Europe based on sovereign states, not on any centralised structure” (Read about the previous far-right summit in Warsaw in the December issue).
Society
New Coach, Old Questions
Czesław Michniewicz became the new coach of the Polish national football team. He replaced Paulo Sousa, who gracelessly terminated his contract with the Polish Football Association (PZPN) last month (read more in the previous issue).
The new coach’s most important task is to win a match against Russia, in Moscow on March 24th. If Polish team win that match, they will host Sweden or the Czech Republic five days later for a spot in the World Cup in Qatar. “In my opinion, he is one of the best coaches in Poland. He won me with one thing, namely by presenting a comprehensive plan for the first play-off match, explaining everything. He is a very ambitious, hard-working coach. (...) Our goal is, as we know, the play-offs. Together, we want to go to the World Cup in Qatar,” said the PZPN head Cezary Kulesza.
Michniewicz recently worked at the Legia Warsaw football club that won the Polish championship. In the past, he coached Lech Poznań, Zagłębie Lubin, Widzew Łódź, Jagiellonia Białystok, Polonia Warsaw and Pogoń Szczecin. In 2017-2020, he was the manager of the Polish youth team that played at the European Under-21 Championship in 2019, recording remarkable results against higher-ranked teams.
A number of commentators criticized this appointment because Michniewicz was documented as having spoken by phone 711 times with Fryzjer (Barber), a man known as “godfather of the football mafia.” Gazeta Wyborcza reported that Fryzjer told one of his collaborators that Michniewicz was aware of the match-fixing. Michniewicz calls all such accusations ‘rubbish’ and in fact he has never faced charges or been treated as a suspect in corruption in football.
Economy
Orlen Invites Saudi and Russian Oil Business to Poland
Poland's largest oil company PKN Orlen said it will sell some Lotos assets to companies including Saudi Aramco and Hungary's MOL to fulfill EU antitrust rulings and complete its takeover of the smaller firm.
Saudi Aramco has agreed to acquire 30% in the Lotos oil refinery in Gdansk (first such Saudi installation in Europe), 100% in an associated wholesale business, and 50% in a jet fuel marketing joint venture with BP. Additionally, PKN Orlen has signed an agreement with Saudi Aramco for crude oil supplies between 200.000bpd to 337.000bpd. Mohammed Al Qahtani, Aramco's deputy CEO, commented: “The agreement with Orlen will enable the development of the petrochemical industry in Poland and in the whole of the Central-Eastern Europe region, while the oil supplies from Saudi Arabia will provide a significant boost to the Polish market.”
Orlen will also be acquiring MOL Group’s 144 petrol stations in Hungary and 41 stations in Slovakia for USD 259 million.
Critics say selling Lotos's assets would result in letting more international competitors into Poland, including MOL that is linked with Russian Gazprom. But Daniel Obajtek, Orlen CEO, and the government argue that taking over the smaller rival will improve company's market position, its bargaining power and investment capacities. “The merger of PKN Orlen with Grupa Lotos is a great economic, political and social event in our part of Europe,” Polish president and PiS ally Andrzej Duda said on Twitter.
Environment & Science
Heavy Equipment in Białowieża
PiS administration is building a border wall to keep out illegal migrants coming from Belarus (cost of EUR 350 million). However, experts warn the barrier will also cut through one of the most significant wild areas in Europe.
The 186-km-long wall will cut into two pieces the last primeval forest on the Old Continent, the Białowieża Forest. Both parts of the forest are listed as UNESCO World Natural Heritage sites and are home to the European bison, lynx, wolves and other endangered species (Białowieża harbors more than 12.000 animal species).
Over 150 NGOs are asking the European Commission to intervene to stop the construction on the border. An appeal was handed together with a letter signed by over 1.500 academics and a petition of the local community opposing the wall. They all say the decision to build the 5,5-m-high wall was taken without public consultations or an environmental impact assessment. The construction with heavy equipment of the wall is expected to take 5 months.
“These type of projects, due to their potential impact on the Natura 2000 sites, should be subject to an appropriate assessment pursuant to the Habitats Directive. In line with the directive, the authorities can approve the project if it is confirmed that it would not have significant negative effect on the integrity of the sites concerned,” answered a Commission spokesperson.
On the other side, the government in Warsaw responded that the construction works will strive for minimal impact and that migration corridors, passages for animals will be provided. Border Guard officials said that trees will only be cut where “absolutely necessary.”
The Oldest Base Reopened
Poland has reactivated its Antoni Bolesław Dobrowolski research station located near the Algae Lake on Wilkes Land in eastern Antarctica, after 43 years.
The station was built in 1956 by the USSR. It was used by Soviets only for two years and then was handed over to Poland. Last time it was used by Polish personnel was in 1979. In 2018, the Polish Ministry of Science and Higher Education supplied funds to the Polar and Maritime Research Center of the Institute of Geophysics of the Polish Academy of Sciences (PAN) in order to revitalize the station. PAN launched an expedition to the station to assess its functionality. The goal of the expedition was to commence research on deep Earth structures and the generation of the Earth’s magnetic field. The expedition reached the station in January and re-activated the station.
Poland has one more station in the Antarctica, the Henryk Arctowski station. It is located on King George Island in the South Atlantic and has been operating since 1977.
International Affairs
More American Soldiers in Eastern Poland
A few dozen elite US troops and equipment landed in Rzeszów, following president Joe Biden's orders to deploy 1.700 soldiers there amid fears of a Russian invasion of Ukraine.
The commander of troops arriving in Poland is Maj. Gen. Christopher Donahue, who was the last American soldier to leave Afghanistan, said: “Our national contribution here in Poland shows our solidarity with all of our allies here in Europe and, obviously, during this period of uncertainty, we know that we are stronger together.”
Polish defense minister Mariusz Błaszczak welcomed the deployment on Twitter with the following words: “Strengthening the US presence in Poland by 1,700 troops is a strong signal of solidarity in response to possible Russian aggression against Ukraine.”
Hundreds more infantry troops of the 82nd Airborne Division are expected to arrive at the Rzeszow-Jasionka airport. US will reportedly send about 2.000 American troops to Poland and Germany, while 1.000 troops would move from Germany to Romania.
Conflict on the Silk Road
On the last day of November 2021 Ukrainian Railways (UZ) introduced a ban on accepting for transportation all shipments sent to Poland in transit through the territory of Ukraine from and to 15 countries, including China, Russia and Kazakhstan. The situation continued until early February 2022 and international supply chains leading to Poland through Ukraine have been disrupted for over two months.
According to Polish State Railways (PKP) the blockade violates the international convention of the Agreement on International Rail Freight Transport (SMGS) and bilateral rail transport agreements. What is more, Ukraine is a member of the Belt and Road Initiative and the ban impacted Chinese investments in Europe. Other countries in Central and Eastern Europe are trying to earn some yuans out of this situation. Estonia has already announced it can provide, if the conflict escalates, multimodal transport solutions to access Poland by sea and assist Chinese goods avoid Ukraine.
The relationship between Polish and Ukrainian railways has been built for many years and resulted with systematic growth of shared operations that benefited both countries. Two decades ago, the total transportation was 3,7 million tons, including the transportation of iron ore accounting for over 80% of the total. In 2021, the transport amounted to over 9,6 million tons, of which only 44% was iron ore. In the first ten months of 2021, imports from Ukraine to Poland reached USD 4,4 billion, which is almost twice as high as Ukrainian exports to Russia.
The Polish minister for infrastructure informed the European Commission of this situation in correspondence in December 2021. One of the beneficiaries of this action is the Russian transport sector, which connects China with the EU via the port of Kaliningrad, while the negative impact is being borne by the Polish and EU rail carriers that are developing rail transport in line with EU transport policy.
Members of the “Solidarność” trade union and railroad workers protested against the blockade. They even organized a demonstration in front of the Ukrainian Consulate in Lublin.
According to sources close to Polish government, Ukraine claimed that the situation has resulted from renovation work and from the fact that Poland has not been taking back empty wagons as required. But experts show connection between the ban and Kyiv’s announced that it would sue the EU over Warsaw’s refusal to increase Ukraine’s number of freight permits in 2022.
On January 31, the head of the Polish presidential International Policy Bureau, Jakub Kumoch, wrote on Twitter: “The beginning of the road marked by presidents Andrzej Duda and Volodymyr Zelensky. There is a will to unblock the railways and talks about road transport. The latter must go hand in hand with increasing the border capacity. Polish companies ready to invest. Other topics soon.” Later a statement was published. “The parties have reached an agreement on a significant increase in the permits for the performance of international road transport, taking into account the needs of Polish and Ukrainian road hauliers. This matter will be discussed in the mixed commission for international road transport, which should set the dates of transfer and the number of additional permits for international road transport,“ the statement reads.
Poland & Germany
Disputes over Weapons to Ukraine
Prime minister Mateusz Morawiecki criticized Berlin’s decision to stop Estonia from providing German-made weapons to Ukraine, as Olaf Scholtz’s government had refused to grant permits for weapons of German origin to be exported to Ukraine. "It's a great disappointment to see Germany suspend permits for the supply of weapons from Estonia to a nation preparing to defend itself against an aggressor," Morawiecki wrote on Facebook.
Polish prime minister drew a link between that move and North Stream 2. “The construction of Nord Stream 2, Russia's gas blackmail, involved billions invested by Putin in Europe, as well as the money 'invested' by former politicians and lobbyists; it gives him the tools to terrorise European countries, one by one,” he wrote. “No economic and energy-related interests of any European country can be seen as a reason for aggression against our neighbor,” he added.
On the other side, Poland has joined a group of countries declaring they will supply weapons to Ukraine amid the country’s tensions with Russia. Following the declaration made by Polish prime minister during his meeting with Ukrainian president Volodymyr Zelensky in Kyiv, Mateusz Morawiecki officially offered “tens of thousands of bullets and artillery ammunition, MANPADs, light mortars, reconnaissance UAVs and other types of defensive weapons.” But he didn’t disclose any further details about terms and conditions. “We are ready to supply to Ukraine several dozen thousand rounds of ammunition and artillery ammunition, air defense systems, and also light mortars and reconnaissance drones,” Morawiecki stressed.
Additionally, a new alliance between Ukraine, Poland and the UK has been launched. In a joint press conference with Mateusz Morawiecki in Kyiv, Ukraine’s prime minister Denys Shmygal said: “I hope that, in the near future, we will be able to officially launch a new regional format of cooperation Ukraine-Poland-UK. In the context of ongoing Russian aggression, we should sign a trilateral document on cooperation to strengthen regional security.” Ukrainian foreign minister Dmytro Kuleba said the alliance is of great significance for his country. “We cannot expect safety and prosperity somewhere in the future when we become members of the EU and NATO. We need them today”, he wrote on social media account.
The alliance with the UK will be another format of cooperation between Ukraine and Poland, as Warsaw and Kyiv already cooperate in the framework of the Lublin Triangle, a regional framework that includes also Lithuania (established in 2020).
Fuel Tourism
Gasoline tourism between Poland and Germany (but also Czech Republic, Slovakia and Lithuania) has flourished. German drivers have been crossing into Poland to tank up after learning that they could save up to sever dozens of euro per refueling (approximately 25 to 35 euro cents cheaper per liter).
This trend follows a reduction on fuel tax and VAT by the government in Warsaw in response to very high inflation.
Local newspapers from Brandenburg or Mecklenburg-Vorpommern are printing instructions on how to save money and use correct pumps in Poland. And when new stations keep opening in Western Poland to meet demands of German tourists, stations in Eastern Germany are empty. The German association of petrol stations warned that German petrol stations near the border may go bankrupt due to the wave of “fuel tourism” to Poland.
Culture
Cranach the Elder Comes Back
“The Lamentation of Christ” by an artist from the School of Lucas Cranach the Elder returned to Poland after 80 years. This oil painting was lost shortly after the WWII – it survived the war in Wrocław and was transported to a warehouse in Kamieniec Ząbkowski, from where it disappeared together with hundreds other art pieces.
Later it appeared in Mariefred, near Stockholm, as a property of Sigfrid Haeggberg, a Swedish engineer who had lived in Poland from the early 1920s. Haeggberg’s sold it to the National Museum in Stockholm. The latter one decided to return it to Wrocław once there was no doubt it’s the stolen masterpiece. “The Lamentation of Christ” is now among the most important element of the Wrocław museum’s collection. According to Polish culture minister Piotr Gliński, it is of “exceptional class”.
Lucas Cranach the Elder was a German Renaissance painter and printmaker in woodcut and engraving. He was a close friend of Martin Luther.
Poland lost over half-a-million works of art during WWII. Over 60.000 of them have been identified and included in the Register of Looted Art of the Ministry of Culture and National Heritage.
Polls & Trends
Party Support
Kantar Public, 30.01.2022
PiS 27%
Civic Coalition 26%
Confederation 9%
Poland 2050 9%
Left 7%
PSL 3%
Kukiz’15 3%
Agreement 1%