of government in Poland is not excessive, with total government spending
reaching 42% of GDP in 2016, in line with most other post-transition economies.
Growth rates are robust, reaching 3%. Unemployment rate is at its historical
low - below 6%. However, the government is still recording significant deficits
(2.5% of GDP in 2016, and even 2.9% in 2017, which is just a bit below the EU
Excessive Deficit Procedure threshold). Public debt remains elevated at 54% of
GDP, but it is stable for the time being. Further fiscal austerity is therefore
necessary, not only to mitigate pro-cyclical fiscal policy, but also to create
buffers from future increase in spending due to demographic changes. Although a
thorough privatization process took place during the 1990s, the
still owns and operates numerous enterprises in various sectors of the economy.
SOEs have a more pronounced role in the economy of Poland than in any other
OECD country. Some of those companies do not operate efficiently, relying on
direct funding from the state for their operation, via subsidies (most notably
the mines). Recent changes, as of January 2017, in the legislation covering SOE
management, could pave the way to their increased role in the economy. Income
tax is progressive, with the lower rate at 18% and the higher at 32%, applied
above a moderate threshold. Corporate rate is 19%, while VAT level is set at
23%, with privileged rates of 5% and 8% for some products. High social security
contributions have led to a high share of non-fixed temporary working contracts
(‘’junk contracts’’) among the working population, because of lower social
contributions scheme applied to them. Labour tax wedge is considered as high,
although it is actually below those of other European OECD countries.