CASE Highlights
Trade, Innovation, and Productivity
Northern Ireland maintains free movement of goods with the EU after Brexit. This arrangement is in line with the Northern Ireland introduced to help maintain peace between Northern Ireland and the rest of the EU. This leads to practical difficulties for the circulation of goods between Northern Ireland and the rest of the UK which remains outside the Single Market. On October 13th, the European Commission proposed a set of arrangements to facilitate trade between Northern Ireland and the rest of the UK within the post-Brexit framework. Among other things, the measures proposed by the EC include reducing 80% of sanitary and phytosanitary compliance checks at the border and facilitating customs procedures required for goods exported from the rest of the UK to Northern Ireland under the Northern Ireland protocol. The EC also proposed to maintain regular dialogue with the Norther Irish stakeholders. These measures are particularly important for Northern Ireland due to its involvement in trade with the EU. In 2019, 59% of Northern Ireland's total exports went to the EU countries, and 69% of their total imports came from EU countries.
Labour Market and Environment
According to the latest data published by Eurostat on October 8, in 2020 Poland issued the highest number of first residence permits for non-EU citizens among the EU Members States – 598,047. Poland was also the major destination for third country nationals entering the EU for work reasons: 502,000 permits were issued for this purpose. The highest number of first residence permits was issued to the citizens of Ukraine – 438.000 (87% of the total number of people who entered Poland for work reasons).
Regarding other purposes of stay, in 2020 Poland issued 27,244 first residence permits for education reasons, 12,250 for family reasons and 56,211 for other reasons. The total number of first residence permits issued in Poland in 2020 decreased by 9.7% compared to 2019 (662,660). The Covid-19 pandemic and related mobility restrictions are believed to be main causes of such change.
After 2014, Poland became the most popular destination among Ukrainian workers. Geographical proximity and higher wages in Poland are for Ukrainians among the most important factors influencing the process of migration decision-making. Ukrainians can also be employed in Poland on the basis of the so-called simplified procedure of employment of foreigners.
Macro and Fiscal
On Monday, October 18, the 2021 International Tax Competitiveness Index, one of the best established benchmarks for tax systems, was published by the Tax Foundation. The yearly report represents a relative comparison of the tax systems from all the OECD countries and evaluates their competitiveness and neutrality. According to the rank, Estonia was judged to have the most competitive tax system for an eighth year in a row. This result is mainly driven by low compliance burden, a corporate tax system that only taxes distributed profits – ensuring that companies reinvest earnings tax-free – and a territorial tax system exempting all the domestic companies’ foreign profits from internal taxation, to name a few. Poland, for its part, came second-last (ahead only of Italy) as it did in last year’s edition of the index due to, among others, multiple distortionary property taxes or the fact that companies can deduct on average only 34% of industrial buildings’ costs from revenues (a difference of roughly 16 p.p. relative to OECD average), so that write-offs in later years are less valuable in real terms. At the same time, some strengths of the Polish tax systems came were noticed as well. For instance, Poland has a slightly below-the-OECD average corporate tax rate of 19% and an above-average tax treaty network of 85 countries.
Overall, the results of the Index showcased that while tax administrations had to focus on temporary measures and on collecting revenue to best support economic recovery in face of critical drops in revenue caused by the Covid-19 pandemic, enhancing tax systems’ competitiveness in the long-term has still been prioritised by many of the OECD countries.
