Poland waives tax for young employees to counter emigration

Poland has scrapped income tax for young employees as part of a drive to reverse the brain drain and demographic decline that's dimming its otherwise strong economic expectations.

Around 2 million Poles expected to have their earnings boosted

Poland's Prime Minister Mateusz Morawiecki says he hopes the new law will stop Poland from 'bleeding' young people. (Yves Herman/Reuters)

Poland has scrapped its personal income tax for young employees earning less than $29,000 Cdn a year, as part of a drive to reverse a brain drain and demographic decline that's dimming the prospects of a country that is otherwise experiencing strong economic growth.

A new law by the right-wing government took effect Thursday, slashing the personal income tax from 18 per cent to zero for workers under the age of 26 below the income threshold. It is expected to boost the earnings of nearly two million Poles at home, and the government hopes it will also persuade young Poles working abroad to return home.

Prime Minister Mateusz Morawiecki recently said he hoped it would "prevent a further loss, a bleeding of the population that is especially painful for a nation, a society, when it concerns the young generation."

But there were strong doubts if the tax relief would stop the drain of talented and educated young Poles to London, Berlin and other cities that offer higher wages and other opportunities.

"I do not think it would stop me and my peers from leaving," said Paulina Rokicka, a 19-year-old in Warsaw who works part-time at a TV station. "It seems to me that we will want to leave (anyway) because there are better perspectives abroad than in Poland."

Part of larger social benefits package

Introduced ahead of fall parliamentary elections, the exemption is part of a larger package of social benefits that has earned the government strong voter support but raised worries about strains on state finances. They include cash bonuses to families with children and a one-off payment to pensioners.

Morawiecki said that some 1.5 million Poles, a number comparable to the population of Warsaw, have emigrated since the nation of 38 million joined the European Union in 2004. Some other estimates have put that number at two million but it is hard to pin down exactly due to the large number of those who go back and forth.

Young Poles stage a 'Summer Climate Strike' in front of the Polish parliament building in Warsaw. (Jedrzej Nowicki/Reuters)

While wages still are far lower than in the West, Poland's economy is growing at around 4.5 per cent and unemployment had dipped below six per cent. In order to fill labour shortages companies have turned to hiring migrants, mostly Ukrainians, some two million of whom are estimated to be working in Poland.

The government says it is focusing on innovation where young inventive minds are highly valued.

Morawiecki recently urged a gathering of young people to "stay here, to take your future in your own hands and be enterprising."

The government estimates the program will cost the budget some two billion zlotys ($685 million Cdn) a year.

Need for young professionals

Pawel Jurek, the finance ministry spokesperson, told The Associated Press on Thursday that young Poles will now have more money left in their bank accounts to allow them to start families earlier. But he said the most important aim is to keep professionals in the country.

Maciej Biernacki, another young employee in Warsaw, also voiced doubts that the tax relief would sway many people, calling it only "one small" element that would be considered in people's life decisions. More important, he said, are issues like business predictability and how the country is run.

"I doubt that this kind of exemption would make anyone stay here in the country if he hesitates about whether to leave or stay," the 25-year-old public relations manager said.

A recent survey by the National Bank of Poland showed that some 15 per cent of Polish emigres would be willing to return home, especially from Britain, where the prospect of a hard Brexit threatens economic pain.