Receipt from the state 2014
End of April is the period of the income tax settlement in Poland. The Civil Development Forum took it as a good opportunity to show Poles how much money the Polish state spends and on what are they spent. It is definitely not a small amount; in the 2014 alone spendings of the state oscillated around the sum of 723 bln PLN, and speaking more lucidly 19 409 PLN per person. The fourth issue of the Receipt from the state, prepared by the Civil Development Forum shows how this amount was spent.
It is always important to remind that public spendings comprise not only those governmental, but also those made by local authorities, self-governments, National Healthcare Found (NFZ), public retirement funds and other public institutions.
By the end of April some of the public institutions still have not published their detailed financial reports for the year 2014, and therefore our calculation should be treated as approximate. They are designed to present the scale of particular spendings per capita. The idea of the Receipt from the state was invented in Slovakia, where it is the flagship project of the INESS think-tank (In Poland similar calculations are carried out also by the Globalization Institute).
According to the initial calculations, the receipt in 2014 was 571 PLN (3%) higher than in the year 2013. This is a real growth of public expenditures because in last year the price level in the economy hasn’t grown. Last year, public spending grew more slowly than our economy, hence, the ratio of public spending to GDP (i.e. the total amount of goods and services produced in our economy in 2014) slightly dropped, from 42.2% in 2013 to 41,8% in 2014. This is a continuation of an ongoing trend since 2010, the trend of falling public expenses in relation to GDP.
This tendency is favorable because substantial public expenditures in relation to the size of the economy are harmful to the economic growth, and the level higher than 40% of GDP while considering country on the same level of development as Poland, can still be perceived as high.
Despite the common believe, the highest spending are not connected with the administration, but with the retirement system. In 2014 the country has spent on them 5908 PLN, which is almost one-third of all public expenditures. The largest part of this amount are pensions paid by ZUS (Social Insurance Institution) – 2739 PLN, then KRUS (Agricultural Social Insurance Fund) – 313 PLN and disability pensions from both institutions – 987 PLN; various types of allowances and benefits (557 PLN) should be added to that amount. Disability pensions and pensions are also claimed by police officers, soldiers, judges and prosecutors (360 PLN) who are under a separate system. These values are net values and correspond to the payments that reached the hands of the pensioners. Actual expenditures on disability pensions and pensions are higher, but 952 PLN returns almost immediately to public finances in the form of National Health Fund (NFZ) contributions and income tax paid by pensioners.
After disability pensions and pensions, three biggest categories of public expenses are education (2202 PLN), health care (2026 PLN), and roads and transport (1310 PLN). Expenditures on education can be broken down into spending on elementary, middle, and secondary schools (1550 PLN), and on higher education (652 PLN). Among infrastructure spending, we can distinguish expenditures on highways and national ways (269 PLN), expenditure on railway infrastructure (86 PLN) and spending of local government on local roads and transport (955 PLN).
As a fifth position on the bill, expenses on external and internal country security (1148 PLN). This amount consists of expenses on the army (620 PLN), the police and the fire brigade (277 PLN).
On the sixth place are costs of servicing public debt, which amounted to 983 PLN. During 2014, public debt per capita increased by 2 042 PLN and amounted to 27 126 PLN. These values do not include the effect of changes in the pension system, in particular, the expropriation of members of OFE from savings accumulated in the second pillar of the pension system. These changes are currently being examined by The Constitutional Court. Taking savings from OFE and replacing them with records on sub-accounts in ZUS, can reduce public debt but will not diminish obligations of the state – hidden debt will increase, the state will still have to repay obligations for future pensioners. However, with such a difference that they will not be recognized in statistics of public debt, but hidden in ZUS. Hiding it allows politicians to circumvent constitutional and European Union thresholds of public debt and increasing indebtedness of a country.
The most visible cost of explicit public debt are expenses for its servicing, which is money that country had to pay for interests, instead of for example allocating them for investments or tax cuts. Public debt has also other negative consequence – less trust for the state and it makes it harder for companies to receive investment loans (because banks are more willing to lend to the state than to enterprises). As a result, businesses invest less and whole economy is developing more slowly.
The seventh largest expenses are the expenses on administration which amount to 992 PLN. Almost half of this amount falls on local government administration (461 PLN); next are expenditures on government administration (332 PLN), administration of the Social Security Fund (ZUS) and the National Health Fund(NFZ) – 144 PLN and other supreme state authorities (55 PLN). It is worth mentioning that administrative expenses are only much more than 5% of total state expenditures. Therefore, do not believe politicians who argue that for example instead of raising the retirement age or introducing other reforms, they can only just dismiss unnecessary civil servants – costs of administration are not so high that their limitation can solve all the problems of Polish public finance.
The next position on our bill is social care, including social benefits and support for unemployed (921 PLN), contribution to the EU budget (477 PLN), environmental protection (374 PLN), housing (240 PLN), culture (287 PLN), sport & leisure (183 PLN) and agriculture, forestry and fishery (204 PLN). Polish state spends money on any other areas of science and computing through trade to tourism. Although expenditures on other various sectors are relatively small, the sum of these “different and small” is 2155 PLN. This amount is the result of various discrepancies – The receipt from the state is created on the basis of forecasts and estimates from different, not fully coherent sources.
All the above calculations apply to “average” citizen of Poland. On website SprawdzPodatki.pl, thanks to the calculator prepared by FOR, anyone who types his/her gross income can check how many taxes and contributions he/she paid and on what they have been spent.
State spending is financed by our taxes. That is why, while discussing the fact that country should spend more on something else (for example on health service or on highway construction), we should immediately wonder whether we would like this to be financed by higher taxes or maybe limiting other public expenses (which?).
Likewise, when proposing lower taxes, it should be immediately indicated which expenses should be reduced. Billions and millions of zloty are being discussed in the Parliament, for the majority of Poles are abstract amounts. At the same time, every day we pay much more tangible taxes, which is the cause of numerous complaints.
That is why FOR(Civil Development Forum) also prepared website www.SprawdzPodatki.pl through everyone can estimate how much money in the form of various taxes and contributions, pays for the maintenance of the state. The tool also shows for what country spends that money; which part of it is intended for among others pensions, health service, administration and others.
Aleksander Łaszek, e-mail: firstname.lastname@example.org