High inflation has prompted many Poles to become interested in investing their savings to prevent their value from being lost. “This trend is gaining momentum, currently, many more people are interested in investing than was the case a few years ago”, says economist Dr. Wojciech Świder. However, he estimates that Poles are still catching up to more advanced Western European economies in this respect.
Easing the 19% capital gains tax, also known as ‘Belka tax’, could potentially increase their interest in investment. “In Poland, we could use a tax-free allowance that would allow small investors to invest without this tax”, the expert assesses.
The uncertain economic and geopolitical situation, and above all, high inflation – which in early 2023 reached 18.4% – encouraged Poles to save and invest their savings to avoid the devaluation of money. A survey “Polish Investor 2023” conducted last year on a group of over 1.15 thousand people, showed that 74% of this group invested, and most of them did so regularly (41% of the entire sample).
The most popular investment assets included precious metals (46%), mainly gold, government bonds (44%) and interestingly, cryptocurrencies (43%). Other investments included deposits in Polish Zloty (41%), fund units, and stocks (around 40% each) and properties (around 30%). The survey also showed that Poles generally avoid risk in investing (over 56% avoid risk), and over 3/4 invest independently, relying on their own analyses and knowledge, which 64% of respondents assessed as professional, significant, or at least average.
“In order to encourage Poles to invest, the benefits it brings should be highlighted and it should be shown that savings that are not investing lose their purchasing power through the inflation mechanism. This inflation has recently been very high, so Poles now know what it is associated with, they know it is reducing their savings, so the interest in investing is quite large under our conditions. Previously, a large percentage of Poles did not care about this topic at all, and if they wanted to invest their capital, it was either in bank deposits or in real estate for larger capital. But now indeed many people are interested in stocks or retail bonds. I see this trend is gaining momentum”, says Dr. Wojciech Świder from the University of Economics in Poznan to the Newseria Biznes agency.
According to the economist, besides economic conditions, what could encourage Poles to show more interest in the topic of investment would be easing the 19% capital gains tax (‘Belki tax’), which has been in force in Poland for 20 years. It was introduced by Marek Belka, Minister of Finance in Leszek Miller’s government, as a way to patch a hole in the budget. It covers, among others, profits from bank deposits, bonds, or stocks.
“This is a wealth tax, so the question arises whether these taxes should cover people who do not have large fortunes. In my opinion, they shouldn’t,” emphasizes Dr. Wojciech Świder. “Of course, there is room for wealth taxes in the Polish system, but if a person has a small fortune and wants to invest small or medium amounts, I think that there should be no Belka tax here.”
As he points out, the ‘Belka tax’ is not a major source of income for the state budget, which gains about 4-5 billion Zloty from it annually, compared to about 260 billion Zloty per year from VAT.
“A good idea is to introduce an amount free from this tax and indeed the ministry is now talking about this. Recently, it was said that investments up to 100 thousand Zloty per year would be exempt from this tax, which in my opinion makes sense because the budget costs would be quite low, and many people would simply be helped to save, invest and in this way combat inflation”, says the economist.
The Ombudsman has repeatedly pointed out this problem, describing ‘Belka tax’ as a kind of punishment for saving capital. As he emphasized, this tax is collected from funds that have already been taxed, as they are usually income earned from work or pensions.
Koalicja Obywatelska promised in their election pledges to introduce a tax-free amount from ‘Belka tax’ of 100,000 Zloty. Its introduction would mean that as long as the savings do not generate a profit reaching 100,000 Zloty in a year, no tax would be deducted from them. In January, Minister of Finance Andrzej Domański announced that a draft of changes in this matter will appear in February. He also announced the construction of a new system of incentives to save and invest.
“A tax-free amount for Belka tax would be a sensible solution. I believe that it would indeed increase interest in investing, although it would not be a drastic leap”, says Dr. Wojciech Świder. “In Poland, after all, we have instruments for long-term investing where there doesn’t have to be Belka tax, such as IKE, IKZE and PPK, i.e. Employee Capital Plans conducted jointly with the employer. These funds are invested by life cycle funds, and there is no Belka tax there provided we live to be 60 and then withdraw these funds according to schedule. But indeed, Poland could use this tax-free allowance which would allow small investors to invest without the 19% tax.”
From this year’s survey “Investment Competence Index”, conducted by Ipsos on behalf of the investment platform Port and Forbes, on a group of over 1,000 respondents, it appears that about 40% of Poles before the age of 45 have experience with investing. However, the level of knowledge in this area remains average: in the 10 questions that make up the index, Poles in total got 42% of the answers right. These results are similar to Slovaks, who had 7.4% more correct answers but far behind the Czechs (37.8%). Poles did relatively well with mathematical profile questions, i.e. calculations on percentages, the compound interest mechanism, and taxes (tax settlement of securities). They were significantly worse with questions about the impact of inflation, the difference between investing in particular instruments, or insurance against stock market falls.
“In developed countries, definitely more people invest. This is due to a longer history of capital markets, greater knowledge, but also larger financial surpluses, often passed on from generation to generation. We, Poles, are still learning this because we transitioned to a market economy only in 1989. It is a certain change of generations and mentality that comes gradually, but from what I see, young people are now very interested in investing, which was not the case even 20 years ago. Of course, compared to more developed countries, we are still behind, but we are catching up, we are making up this distance”, says the economist.
