The Polish government announced December 21 that it has dropped the idea of a single tax and social security payment, which it had widely promoted in recent months.

The government wanted to introduce a single tax and social security payment to replace the separate payments of personal income tax and social security/health insurance premiums. It had claimed the new system would simplify the collection system, balance the tax and social security burdens of various forms of employment or personal services, and introduce a more progressive tax rate scale, replacing the general 18 percent and 32 percent brackets and the 19 percent optional flat rate scheme for individual entrepreneurs.

The full details of the proposed reform were never announced, but information obtained from various government sources sparked strong opposition from taxpayers, particularly the business community. Reportedly, the tax and social security burden would have been slightly lowered for low-income taxpayers but significantly raised for high-income individuals (to nearly 40 percent). Also, individual entrepreneurs would have lost the 19 percent flat rate option.

Business organizations loudly voiced their skepticism regarding the new system, which they perceived as detrimental to the small and medium-size businesses run by individual entrepreneurs.They argued the new system would force those businesses to close down or move abroad. As opposition to the planned reform grew, the government decided to drop the idea.

Janusz Fiszer, associate professor, Warsaw University School of Management, and partner, GESSEL Law Office, Warsaw