Bureaucratic lawlessness is a problem that needs to be resolved as a matter of priority. It is essential to put an end to illegal acts carried out by tax officials, law enforcement agencies, and social security institutions, particularly against entrepreneurs. These strong demands emerged from the “New Economic Policy” proposed by the Entrepreneur’s Council and the Scientific Council at the Small and Medium-Sized Entrepreneur’s Ombudsman.
Promises for entrepreneurs
The Council reminds us that during the election campaign before the parliamentary elections in 2023, many pro-business changes were promised aimed at improving the Polish economy. These include a minimum 6-month period between the publication of changes in tax law and their implementation, no tax increases (Income Tax, Corporate Income Tax, Value Added Tax) until 2026, facilitations for companies regarding compulsory social insurance, and limiting the duration of inspections of micro-entrepreneurs to 6 days a year. But what is the current situation?
Bureaucratic lawlessness – Social Insurance Institution
“It is necessary to end the violation of the Constitution’s principles by Social Insurance inspectors” – write in their demands the Entrepreneur’s Council and the Scientific Council. The Social Insurance Institution arbitrarily creates legal regulations, undefined by any laws or mandates. Examples include introducing definitions like “illusory partner” or “almost a one-person company” for the purpose of taxing entrepreneurs. They also routinely deny women entrepreneurs their right to benefits, despite having chosen insurance from the permissible, maximum basis of their calculation. These are fundamental principles every official should adhere to: a) what is not prohibited is allowed, b) any doubts about the interpretation of the law should be resolved in favor of the entrepreneur, c) presumption of the entrepreneur’s honesty.
Repressive penalties for unintentional violations of regulations
The Council has proposed to establish a special team that will monitor regulations introduced in recent years to determine whether they impose unconstitutional, disproportionate duties on entrepreneurs. Reporting obligations on national tax schemes should be abolished, and repressive penalties for unintentional violation of laws should be reduced.
Reprehensible practices by the tax authorities
There is an urgent need to curb reprehensible practices of law breach by civil servants, notably the instrumental initiation of tax criminal proceedings solely to suspend the statute of limitations for tax liabilities of entrepreneurs. Another issue is situations where, despite obtaining individual interpretations issued by the Director of the National Fiscal Information, it does not provide the taxpayer protection during subsequent inspection activities. The tax authorities should stop issuing general interpretations that worsen entrepreneurs’ situation by changing their individual interpretations. Such actions often disturb the company’s financial liquidity, leading to its liquidation.
Requirements higher than the European Union itself demands
Although there is no doubt that EU membership brings many benefits to Poland, some directions of its economic policy have significant negative consequences for local entrepreneurs. This includes the introduction of a new carbon tax (CBAM) or a minimum European corporate tax. Polish authorities should implement new EU regulations thoughtfully to minimize the burden on entrepreneurs. EU+0 principle, i.e. not establishing additional requirements beyond what the Union requires, should be maintained. It’s been noted,’ however, that Polish authorities often impose more restrictions on local entrepreneurs than Brussels.
Overproduction of laws and protracted proceedings threatening company existence
For over 30 years, entrepreneurs have had to grapple with over-regulated, opaque laws, which, arbitrated by officials, can impede business development. The amount of time and money entrepreneurs must devote to administrative and reporting requirements is growing, weakening their competitiveness in the global market. Therefore, we call for the reduction of legal administrative duties from micro-entrepreneurs, and eliminating some reporting requirements, where companies have to report identical data to different institutions.
Despite legal system reforms, legal proceedings have been increasingly prolonged, and lengthy court cases often lead to lost financial liquidity and even bankruptcy of honest companies.
Bureaucratic lawlessness – Law Enforcement Agencies
“The practice of abusing temporary detentions by prosecutors and courts should be limited, especially against entrepreneurs,” writes the Council. Suspicion of economic crime, even based only on documents without hearing any witnesses, often results in temporary detention. The maximum allowed period of detention should be reduced, and electronic surveillance system should be used as an alternative to detention.
Disciplinary liability of officials
Cases where officials are held accountable for dilatoriness or wrong decisions are rare. Without this, it is difficult to talk about building entrepreneurs’ trust in the state. The role of the authorities should not be to oppress decisions but provide advisory services. The Civil Liability Act, in practice, is currently a fiction, where one should hold these civil servants accountable for causing significant negative effects due to negligence or errors. If the damage is insignificant, only then should one refrain from imposing a penalty. Disciplinary cases are currently handled by committees consisting of same-level officials – this should be done by higher authorities.
Entrepreneur’s Constitution is a pipe dream
In 2018, the so-called Entrepreneur’s Constitution was passed, a package of laws that was supposed to reform the rules of conducting business activity in Poland, primarily by improving the relationship between entrepreneurs and the office and simplifying rules and obligations related to running a company. However, despite years, the practice of authorities’ actions deviates from the ones contained in it. It would therefore be necessary to start regular monitoring of compliance with the Entrepreneur’s Law by officials and take into account the results of this observation when assessing an official’s work.
Summary
The legal system regulating economic trade urgently needs repair. Today, entrepreneurs are often treated from above as schemers and criminals, and lengthy proceedings and court cases drain company accounts, leading to loss of financial liquidity or bankruptcy. Therefore, the demands of the Entrepreneur’s Council and the Scientific Council are quite appropriate and need consideration as soon as possible.
Author: Robert Nogacki, legal adviser, managing partner, Law Firm Skarbiec, specializing in legal, tax and strategic advice for entrepreneurs.
Source: https://managerplus.pl/bezprawie-urzednicze-problem-ktory-trzeba-rozwiazac-teraz-jakie-zmiany-sa-konieczne-dla-poprawy-sytuacji-polskich-przedsiebiorcow-28442
