By, or on, the last day of April everyone who is part of the Polish system of taxation must submit their PIT-37 annual tax return form to the Urząd Skarbowy and pay them whatever money is due. Popular belief is that if you don’t do this you will be banged up in the nearest prison or have your head removed and displayed on a pole outside the nearest U.S office. At any rate, the consequences are said to be dire and so nobody has ever bothered trying.
I’m proud to be a fully nationalised foreign type paying entirely correct Polish taxes according to the same laws as all Poles. This makes life simple, but expensive. Expensive because the highest rate of tax is 40% (plus all the ZUS payments on top making total deductions more like 45%!!!) and because the highest rate is applied on any earnings above 85,528 PLN per annum. By contrast, the highest rate of UK tax is also 40% but this is not applied until you pass the 160,000 PLN mark (and that figure is artificially low now thanks to the exchange rate). Furthermore, between 44,490 – 85,528 is taxed at 30% in Poland and below that at 19%. In the UK everything below 160,000 is at 20%. In Poland, you can earn a whopping 3,090 PLN before you pay any tax, in the UK you can earn 25,000 PLN. Child allowance for Zosia in Poland is 1,145 PLN, in the UK this would be over 4,000 PLN.
As a general rule, I would expect about 35% of my income to disappear in the UK versus more like 45% here. If you take into consideration what you get for your money…..well…..don’t, because it’s not a pretty picture.
I think it is fair to say that the tax levels in Poland are starting to look very silly and need to be changed. The very wide diversity of income levels does not make it easy, but there are plenty of ‘normal’ Poles, in Warsaw at least, who are earning enough to reach the highest levels of tax after only 3-4 months. At the same time, there are many who, like my wife, will work their arses off the whole year and never leave the 19% bracket. Tusk was talking about a flat rate of 15%, promised to make this happen as far as I recall. Frankly, although I wouldn’t be complaining, I think this is going too far. I’d be more than satisfied with 25% flat rate or with a serious overhaul of the tax bands such that the higher rates don’t come in until much later. We’ll have to wait and see what happens. At the moment nobody seems to be doing anything about revising the tax system at all, so I’ll continue to pay very considerable amounts each month for things I mostly don’t use or on which I see no investment being made to improve them.
Still, all this does give me plenty of opportunity to take part in the annual PIT fiasco. Coming from the UK system, the Polish way is a bit of shock to the system. I’m not used to having tax deducted every month but then having to recalculate it all at the end of the year with a high degree of certainty that you will find you have not paid enough! I find it very strange that one’s employers are not able to get it right each month and that you’re left with this end of year black-lottery where you finally discover if you have put enough cash away to pay the tax man.
The PIT-37 is a round-up of all and any PIT-11 documents you might have collected during the year, you would normally have one from any employer as well as any other relevant documents. For example, I got one this year from the bank declaring the whopping 74 PLN of interest I earned. You can declare your tax as an individual or, as in my case jointly with my wife. This year is slightly complicated for us as we have three PIT-11s, two for me because I changed jobs in 2007 and one for my wife.
Changing jobs was interesting and most people know that this spells trouble come the day of reckoning. The reason is that the new employer has to start taxing you from the beginning of the scale – zero, then 19, then 30 then 40. For some obscure reason, they cannot look at your PIT 11 from previous employer and start you off with the correct deductions. Don’t ask me why. Therefore, you are guaranteed to be paid too much and end up with a considerable burden the following April.
I have a deeply rooted phobia of anything to do with taxes or officialdom of any kind. I am therefore completely useless at times like this. No matter how simple the documents might be I just stare at them or throw them in a dark corner and hope they go away. Of course, they don’t go away and so I have to seek help. This year I tried two methods. I firstly asked someone at work to help out and they came back with numbers that I owed the tax man that put me into a state of shock for about three hours. On further investigation, she had added the numbers incorrectly and the situation got better, but still didn’t seem right as there was little difference between going solo or joint. In our case, the general rule is that making a joint declaration saves quite a lot of money, so to be the same amount seemed wrong. I therefore went to a proper accounts office and they have come up with much more convincing numbers, albeit still more than I expected. In true Polish style, the document I have from the bank about my 74 PLN is the wrong one and so I have to bugger around getting that changed to account for approx 5 PLN extra tax I should be paying! Otherwise, all I have to do now is sign the papers, post them to the U.S (registered post) and then transfer them the entire contents of my bank account. Lovely month, April. Great system!
There is only one thing that makes the whole system bearable. You can donate 1% of what you pay to a charity. This year we’re sending our 1% to the Fundacja Spełnionych Marzeń.