How Tusk fought against inflation

Donald Tusk with large fatherly concern leaned over the destiny of us small ones, and lowered fuel prices. erstwhile again, the Government of the brightest Republic has overcome the problems that it had previously created. However, the case has a second and even 3rd bottom, so it is worth looking at it a small closer and without unnecessary emotion to put it on first factors.

Firstly, Donald Tusk's action is not peculiarly innovative. The same solution was introduced a fewer years ago by Mateusz Morawiecki, giving him the "anti-inflationary shield" name. Both then and now the justification was the fight against costly and widely understood anti-inflationary actions. At that time Morawiecki's decision to heaven was praised by PiS followers, while activists of the Civic Coalition did not leave a dry thread on it. Today, the situation looks precisely the opposite: the people of Tusk are disintegrating, and their political antagonists accept the pose of harsh reviewers. Interestingly, arguments on both sides are almost identical, only signs and emotional attitudes have changed.

You must have met on social media with a calculation to justify why, in fact, we should be dissatisfied with the fact that we pay less. It sounded something like this: the simplification is actually an increase in prices. If individual drives a oil transportation truck, before the simplification they paid PLN 8.2 gross, which after deduction of 23% VAT gives about PLN 6.3 net. After the reduction, PLN 7.6 gross at 8% VAT means about PLN 7 net, i.e. the real cost for the company increases by PLN 0.7 per litre. At first glance, this sounds convincing and can make a logical impression.

The problem is, it's a beautiful clever manipulation. First of all, it is based on false base data. The net price of a litre of diesel was about PLN 7.03 before the reduction. At a rate of 8% VAT, this gives about PLN 7.6 gross, while at 23% VAT it would be about PLN 8.64. Meanwhile, real gross prices at the end of March varied, depending on the voivodship, between PLN 8.64 and PLN 8.81. This means that even the VAT deductors actually gained, from a fewer to a twelve cents per litre, and did not lose, as suggested by online calculations.

Besides, VAT in the fuel itself does not constitute any mysterious ‘cost’ which – I have the impression – many Poles inactive do not understand. From the accounting officer's point of view, the VAT on fuel d is not at the expense of obtaining income (as a taxation cost) for entities who are entitled to deduct this taxation in full or in part. For entrepreneurs who are active VAT payers, this taxation is in rule neutral. Furthermore, a large proportion of entrepreneurs do not have the anticipation to deduct VAT from fuel. For example, in the case of passenger cars utilized for both business and private purposes, the entrepreneur only deducts 50% of VAT. Uncounted 50% of VAT increases the cost of obtaining income in income tax, but the VAT deducted itself is not at the expense.

In conclusion, the simplification in fuel prices is cost-effective for the vast majority of consumers and remains, at most, neutral for the others. Should we then praise Donald Tusk and his government? Definitely not.

The actions of the Prime Minister were typically reactive. This is simply a crucial method of conduct for Tusk: there is simply a problem – the government ignores it, then the problem grows and begins to origin social unrest. Finally, at the right time, Tusk enters on a white horse and announces its solution. Only in this case, there is no real solution. The simplification in fuel prices is only a ‘symptomatic treatment’ alternatively than a removal of the origin of the disease.

The real solution to the problem of advanced prices on Polish stations would be to specify and remove its source. Meanwhile, the main reason remains to cut off inexpensive fuels from Russia. It was the breaking of the current import directions that made the costs emergence and stay high. In this perspective, only the restoration of average trade in goods could permanently – and importantly, neutral for the state budget – reduce fuel prices. This would not only be a relief for our portfolios, but besides a crucial boost for the economy as a whole.

But let's not fool ourselves. In the Polish playhole, which is becoming more and more like a closed psychiatric facility, where further groups charge each another with treason and agentry, a serious debate on this subject is virtually impossible. Any effort to go beyond the current schematics ends with an immediate attachment of the “Russian onus” patch and closing the discussion.

As a result, we will be stuck in the same place: expensive, chaotic and without real strategy. And the bill for incorrect state policy as usual will be paid by us taxpayers.

Przemysław Piasta

Think Poland, No. 15-16 (12-19.04.2016)