April 16, 2018 / 7:37 PM / a year ago

Polish PM signals budget can cope with cut in corporate tax

WARSAW (Reuters) - Poland’s planned cut in income tax for smaller companies will cost up to 600 million zlotys ($180 million) per year, Prime Minister Mateusz Morawiecki said on Monday, suggesting that it would have little impact on the budget.

FILE PHOTO: Poland’s Prime Minister Mateusz Morawiecki arrives at a European Union leaders summit in Brussels, Belgium, March 22, 2018. REUTERS/Francois Lenoir

The ruling Law and Justice (PiS) party, which is gearing up for a series of elections, on Saturday promised a reduction in corporate income tax for small and medium-sized companies and higher spending on child benefits and infrastructure.

Morawiecki told Polsat News television that the cost of the planned reduction in corporate income tax to 9 percent from 15 percent may come to 500 to 600 million zlotys.

He said the cost of the planned payment of 300 zlotys ($90) a year for parents of school-age children would cost about 1.4 billion zlotys, while a reduction in social security payments for self-employed would cost about 500 million zlotys per year.

“We have calculated very precisely all proposals that we present to the people,” Morawiecki said, responding to criticism that additional spending could destabilize the budget.

This year’s central budget envisaged spending of 397 billion zlotys, not including the latest proposals.

Separately, state news agency PAP quoted on Monday head of the Council of Ministers’ Standing Committee Jacek Sasin as saying that the central budget remains in surplus after the first quarter.

Poland’s gross domestic product grew by 4.6 percent last year to $590 billion, and the fiscal deficit fell to its lowest in more than two decades, with public debt falling about 4 percentage points as a proportion of GDP.

“The new proposals of the government will not change the fiscal deficit in 2018 in a significant way,” ING Bank Slaski said in a note, adding it expected the deficit to decline to 1.3 percent of GDP from 1.5 percent last year.

Rating agency S&P Global unexpectedly changed the outlook on Poland’s BBB+ sovereign rating to positive from stable on Friday.

Reporting by Marcin Goettig; Editing by Hugh Lawson

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