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'Klin'-ing up: effects of Polish tax reforms on those in and on those out

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  • Leszek Morawski
  • Michal Myck

    (Institute for Fiscal Studies and DIW-Berlin)

Abstract

In 2007 and 2008 Polish governments introduced a series of reforms which led to a substantial reduction in the tax "wedge" (in Polish: "klin") on labour. The mean ATR on total labour cost was reduced from 41.6% to 34.0%. We show that when considered together the package of introduced reforms brought much greater reductions in the tax burden compared to a widely discussed 15% "flat tax". In the analysis we show the effects of the reforms both for the employed and for the non-employed populations. The latter analysis is done in such a way as to account for the entire (simulated) distribution of wages of the non-employed and shows interesting differences between the effects of reforms on employed and non-employed individuals. We argue that to fully appreciate the effect of reductions in labour taxation it is important to bear in mind that one of the reasons for introducing them is to make employment more likely for those who currently do not work. Given the extent of the reductions in the "klin" it is somewhat surprising that so far so little attention has been given to the recent Polish reforms.

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Bibliographic Info

Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W08/12.

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Length: 31 pp.
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:ifs:ifsewp:08/12

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Keywords: Work incentives; tax wedge; labour costs; employment;

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References

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  1. Gilles Saint-Paul, 2004. "Why are European Countries Diverging in their Unemployment Experience?," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 49-68, Fall.
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Cited by:
  1. Michal Myck & Mateusz Najsztub, 2014. "Data and Model Cross-Validation to Improve Accuracy of Microsimulation Results: Estimates for the Polish Household Budget Survey," Discussion Papers of DIW Berlin 1368, DIW Berlin, German Institute for Economic Research.
  2. Myck, Michal & Nicinska, Anna & Morawski, Leszek, 2009. "Count Your Hours: Returns to Education in Poland," IZA Discussion Papers 4332, Institute for the Study of Labor (IZA).
  3. Karbownik, Krzysztof & Myck, Michal, 2012. "For Some Mothers More Than Others: How Children Matter for Labour Market Outcomes When Both Fertility and Female Employment Are Low," IZA Discussion Papers 6933, Institute for the Study of Labor (IZA).
  4. Michal Myck & Anna Kurowska & Michal Kundera, 2013. "Financial support for families with children and its trade-offs: balancing redistribution and parental work incentives," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 13(2), pages 59-83, December.
  5. repec:diw:diwwpp:dp1315 is not listed on IDEAS

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