Business-owner – a taxpayer, an employer, and a partner.” What do these words mean exactly? This is the question I asked myself at this year’s Economic Forum in Krynica, Poland, a meeting point for the government, politicians, and business operators. The answer seems quite simple. What business values most highly in a state’s regulatory policy is the stability of the legal system combined with equal treatment of all businesses by the government and a transparent dialogue between the government and business operators in the legislative flow. This very dialogue proved to be the foundation of the state’s economic development on many occasions. On the other hand, the lack thereof had quite the opposite effect. It resulted in redundancies and putting investment decisions on hold by business owners. This dialogue is equally important for small and medium-sized domestic businesses as well as foreign investors, both those already present in Poland and those looking for investment opportunities in this part of Europe.

Limiting VAT fraud in the fuel sector is one of the best examples of successful cooperation between the government and businesses in the recent years. Until 2016, struggling with illegal operators in fuel trade was the day-to-day reality of the industry. The grey and black markets, scams related to VAT, violation of excise duty and mandatory stock regulations, as well as non-compliance with biofuel quotas; all gradually became more prevalent in 2011-2015. According to independent estimates of the time, the value of fraudulent transactions in fuel trade was in excess of PLN 10 billion in 2015 (2016 POPIHN Report). When looking at the data now, we know that this figure was largely underestimated.

The large scale of that pathology led to an open dialogue between business operators and the government, and helped to initiate a legislative process aimed at eliminating the loopholes in the system. The measures taken by the government in 2016-2017 (fuel package, energy package, and transport package; the so-called SENT) helped to significantly reduce crime in fuel trade and increase its legitimate consumption. PKN Orlen estimates that in 2016-2018, lawful trade in diesel increased by ca. 30% in Poland. According to official data of Agencja Rynku Energii S.A. (Energy Market Agency), the consumption of diesel will grow by ca. 43% in 2015-2018, with GDP increasing by ca. 13% in the same period. Regardless of the economic growth effect, we believe that the legitimate diesel market expanded by ca. 30% due to cracking down on illegal trade (Press Office of PKN Orlen, 4 October 2018). Substantial growth in official consumption can also be noted in the petroleum and LPG markets. Nevertheless, areas remain where money is still being made illegally. According to POPIHN (Polish Organisation of the Oil Industry and Trade), fraudulent operators come up with new methods of deception, for instance in logistics, by carrying fuel in non-compliant vehicles (in milk tankers, in plastic containers on ordinary lorries etc.)

Cracking down on illegal operations significantly improved the standing of individual retail site owners and large fuel companies. Notably, the Ministry of Finance is – naturally – also a huge beneficiary of the cooperation with businesses

Cracking down on illegal operations significantly improved the standing of individual retail site owners and large fuel companies. Notably, the Ministry of Finance is – naturally – also a huge beneficiary of the cooperation with businesses. According to POPIHN, the state budget collected PLN 22 billion in VAT, PLN 30.6 billion in excise duty and PLN 6.1 billion in fuel tax from fuel sales in Poland in 2018. The total amount of taxes and duties collected was PLN 59 billion. “This represents the equivalent of a three-year expenditure on the ‘Family 500+’ programme”, said Krzysztof Romaniuk at the annual POPIHN conference. It is plain to see that well considered legislative changes can benefit ordinary citizens.

This example demonstrates that a transparent cooperation may be key to the success of a legislative process which is beneficial for all partners in the social dialogue. Therefore, it is surprising that – at present – bills are being passed hastily and the social consultation process is being neglected. According to calculations by Grant Thornton – the audit and consultation company – 11.8 thousand typescript pages of major legislative acts (including bills, regulations, and international accords) were passed in Poland in H1 2019. This means that, after two years of a slow-down in the legislative process (in total by 58% in 2017 and 2018), it is picking up speed again. According to Grant Thornton, if we assume that the dynamic development from H1 is maintained in H2 2019, a total of 21.5 thousand pages of new laws would have been created by the end of 2019, up by 1.1 thousand pages relative to 2018. This would be the fourth largest output since 1989, higher even than at the beginning of the past decade when Poland became an EU Member State and had to align its legal system to that of the EU. A business operator or a citizen, if willing to read all the newly passed acts of law, would have to spend more than three hours a day reading in 2019 (assuming a rate of two minutes per page). As a result, Poland has one of the highest rates of legal change in the European Union.

Let me reiterate my original statement: a stable regulatory environment is a prerequisite for long-term business planning and one of the key aspects of economic growth. I am not against changes in law. I only believe that the development of a regulatory policy requires teamwork between the government, business, and social partners. Only then can we give a true meaning to the definition of a business operator – a taxpayer, an employer, and a partner. It is imperative that the massive amount of new laws passed is reduced, and a proper social consultation process takes place in the spirit of partnership.

Finally, let me ask a rhetorical question: can Poland afford to enact poorly drafted bills, for instance those relating to retail tax, rescission of the social security contributions cap (the so-called thirty-fold limit), and a sharp increase in the minimum wage? Can the state budget afford to hinder the profitability of the retail sector, lower the net wages of the most skilled members of the labour force, and at the same time dramatically increase business running expenses? In my opinion, it cannot. Still, business-owners are ready for dialogue and cooperation in relation to all these matters.