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- Poland can become the technological heart of Europe– Mark Loughran, the General Manager of Microsoft in Poland, said nearly two years ago, in the midst of the COVID-19 pandemic. Back then, lockdown restrictions in Poland were starting to ease, but the level of economic uncertainty was still extremely high. The scale and length of the recession were a mystery. Meanwhile, Microsoft, together with the Polish government, announced that it will partner with the National Cloud (Chmura Krajowa), the joint brainchild of the state-owned PKO BP bank and the Polish Development Fund. As part of the partnership, the US-based tech corporation has committed itself to investing $1 billion in Poland.

Considerable economic success has dropped into the Polish government’s lap at the height of a pandemic-induced crisis. Prime Minister Mateusz Morawiecki seemed delighted.  - Our primary goal is to accelerate Poland's transformation into a technology hub for the entire Central and Eastern European region- he commented. His enthusiasm was also shared by Jean-Philippe Courtois, head of Microsoft Global Sales, Marketing and Operations. - I am proud to announce the investment of one billion dollars in the ongoing digital transformation in Poland and the development of the Polish Digital Valley - he said.

But that’s not all. A month after Microsoft announced its big investment, Google came out with even bigger news. According to the daily "Puls Biznesu", the American tech giant will invest up to $2 billion in Warsaw. 

Big Tech companies should pay their fair share of taxes? The Polish government disagrees

One year later, a historic decision was made at the G7 finance ministers’ meeting. For the first time ever, the world's largest economies decided to harmonize their corporate taxes and agreed to support a global minimum corporate tax rate of 15%.

At that point, the idea was still in its infancy. Poland, however, was already rushing to announce that it will not accept it.

- The G7 should not dictate to us what kind of taxes we should have in our country- the then Minister of Finance Tadeusz Kościński was quoted saying by the Financial Times. 

The Polish government claims that such a solution would deprive Poland of the necessary tools to effectively attract foreign investors. But that is precisely the reason why the world’s wealthiest liberal democracies agreed to support the global minimum corporate tax. It was concluded that giving tax breaks to large multinational corporations is a road to nowhere, bringing more losses than benefits. To incentivize foreign investors, countries are competing with each other to lower tax rates to absurd levels, a phenomenon that has been dubbed a "race to the bottom".

According to a report prepared by the Fair Tax Foundation, between 2011 and 2020, Amazon, Facebook, Alphabet (Google’s parent company), Netflix, Apple, and Microsoft paid a combined $96 billion less in taxes than their financial records would suggest. The effective tax rate on the digital giants' profits was just 3.6 percent! 

Finally, at the end of March this year, Alphabet CEO Sundar Pichai arrived in Warsaw. He met with Prime Minister Morawiecki. Officially, their conversation was supposed to focus on "issues related to cyber security and the fight against disinformation".

Mr. Pichai declared that the US tech giant will invest an additional $10 million in new partnerships with civil society organizations to "support fact-checking".  

Barely two weeks later, at a meeting of the Economic and Financial Affairs Council (attended by the economics and finance ministers of EU member states), Poland opposed the tax rules targeting multinational digital giants. Rumor has it that this is supposed to be Poland’s "revenge" on Brussels for blocking its recovery funds. The Polish government denies it.

Formally, Poland's position is not a veto. - Poland wants the two-track tax reform envisaged in the OECD agreement to be fully implemented- the Ministry of Finance said. - Poland's goal remains unchanged: to work out a fair, effective, and internationally acceptable solution to tax issues resulting from the processes of globalization. 

Global minimum corporate tax? Yes, but…

During its meeting, the Economic and Financial Affairs Council discussed the second pillar of the tax reform, i.e. the global minimum corporate tax rate (15%). There is also the first pillar and it concerns the distribution of tax paid by a company within a consolidated financial group. - That is, what portion of the total tax profit is allocated to the country where the company officially operates- explains Jan Zygmuntowski, an economist at the Kozminski University in Warsaw.

It is crucial to point out that both pillars of the tax reform are interrelated. - You cannot say that you adopt only the first pillar and oppose the second, because you will not be able to attract investors with competitive tax incentives. The two pillars are inseparable: by blocking one of them, we automatically reject the entire reform- adds Mr. Zygmuntowski. 

The Polish government's narrative in this case is very similar to what Google says about the global minimum corporate tax.

When the idea of a single tax rate for the entire world was first introduced at the G7 summit less than a year ago, Google, through the lips of its spokesman José Castañeda, said it "strongly supports the work being done to update international tax rules". "We hope countries continue to work to ensure a balanced and durable agreement [which] will be finalized soon". Reading between the lines, Google is essentially making it clear that a single tax system that would satisfy everyone cannot be negotiated. 

Poland would benefit greatly from a global minimum corporate tax rate. According to last year's report prepared by the Polish Economic Institute, the unification of taxes for large corporations would generate as much as $695 billion annually on a global scale.

The Polish budget could gain between $800 million to as much as $4.5 billion. This is potentially much more than the money levied from parafiscal taxes that the authorities have recently imposed on all Polish citizens.

That’s the kind of money the public is losing under the pretext of tax competition, i.e. participation in the "race to the bottom". - Talking about competing through taxes is like announcing that we are going to participate in a race, in which some of the competitors are already at the finish line - concludes Mr. Zygmuntowski.

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Every day, 400 journalists at Gazeta Wyborcza write verified, fact-checked stories about Polish politics and society, keeping a critical eye on the ruling camp’s persistent assault on democratic values and the rule of law; the growing cultural tension between religious fundamentalism and human rights; and the ongoing COVID-19 epidemic. Our journalists are on the front lines in 25 Polish cities, reporting from the streets, hospitals, and courtrooms about issues that move public opinion.

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