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'Klin'-ing Up: Effects of Polish Tax Reforms on Those In and on Those Out

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Author Info
Morawski, Leszek () (Warsaw University)
Myck, Michal () (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. 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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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3746.

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Length: 32 pages
Date of creation: Oct 2008
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Handle: RePEc:iza:izadps:dp3746

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Related research
Keywords: work incentives; tax wedge; labour costs; employment;

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Find related papers by JEL classification:
H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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References listed on IDEAS
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  4. Viktor Steiner & Katharina Wrohlich, 2004. "Household Taxation, Income Splitting and Labor Supply Incentives: A Microsimulation Study for Germany," Discussion Papers of DIW Berlin 421, DIW Berlin, German Institute for Economic Research. [Downloadable!]
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  7. Fiorito, Riccardo & Padrini, Flavio, 2001. " Distortionary Taxation and Labour Market Performance," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(2), pages 173-96, May. [Downloadable!] (restricted)
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  9. Kevin Kim & Ricardo Varsano & Michael Keen, 2006. "The "Flat Tax(es)": Principles and Evidence," IMF Working Papers 06/218, International Monetary Fund. [Downloadable!]
  10. Mitra, Pradeep & Stern, Nicholas, 2003. "Tax systems in transition," Policy Research Working Paper Series 2947, The World Bank. [Downloadable!]
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