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To boost investment, Poland should ease labor costs instead of lowering corporate taxes
Poland and the six other countries that joined the European Union on May 1 could benefit more from easing taxes on labor than further lowering corporate income taxes to stimulate domestic investment and attract more foreign direct investment (FDI), Thomas Laursen, the World Bank's lead economist for Central Europe, said at a news conference Thursday.
"Maybe it would be better to cut labor costs rather than further decrease the corporate income tax," Laursen said. "Decrease of the labor costs compounded by rationalization of social spending would lead to an increase in employment and an increase in economic activity."
The World Bank released a report Thursday on the economic situation in the eight EU accession countries. The report provides an update on key economic developments and reform initiatives in the eight of the 10 countries that joined the EU on May 1. It is the third such report in 2004. The eight countries include Poland, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Slovakia and Slovenia.
Concerns about "unfair 'tax competition'" have mounted among some of the original EU member countries, in the wake of tax cuts in new member countries, the bank report said. In January, Poland slashed its corporate income tax to 19% from 27%. The move has boosted budget revenue, as more companies are paying taxes.
While the lower corporate tax rates help stimulate FDI, other factors, including labor and production costs, are more important, the bank said. Most important is the overall investment climate, it said.
The eight new member countries "have some way to go before they can be competitive on this front," the bank said. "In the meantime, the flow of capital from old to new member states is a natural part of the income convergence process, including because of low labor mobility from new to old member states."
(Source: http://www.interfax.com/com?item=Pol&pg=0&id=5762549&req=) |
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