Reforming the Polish Tax System to Improve its Efficiency

The Polish tax system is characterised by high social security contributions for both employers andemployees. As a result, Poland has one of the highest tax wedges in the OECD, despite relatively lowpersonal income tax rates. This, combined with a relatively high minimum wage and generousearly-retirement and disability benefit programmes, contributes to low employment rates, in particularamong low-skilled workers. The system also relies heavily on consumption taxes, whereas relatively littlerevenue is collected from such bases as environment externalities, inheritances and, in particular, property.One of the key implications of the tax structure is that the system as a whole is one of the leastredistributive among OECD countries. This paper reviews the main features of the tax system and exploresoptions to improve its efficiency, including possibilities to broaden existing tax bases as well as to shift thetax burden from labour towards less mobile and distorting sources such as property.