Fairness, simplicity, taxation and a sustainable society

Walter Scheidel's The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century traces the rise and fall of inequality over the millennia. The Austrian economic historian has concluded that inequality has a natural tendency to increase over time, and that falls in inequality are always dramatic and sudden, and caused by war, pandemic, state collapse or revolution. And that like Kondratieff's Long Wave cycle in economics, they are inevitable.

What's worrying is that Scheidel is suggesting that we're overdue for one of these shake-ups, as the rich are now holding a similar percentage of the world's income as they did before WW2. In the years after WW2, inequality hit a low in the late 1970s; since then it has been rising inexorably. Prof Scheidel shows that events such as smaller wars not involving mass mobilisation, pandemics, civil wars or economic crises do not lead to a reset of the balance between rich and poor. It takes a whopper such as the Black Death, the Great Plague, WWI followed by the Spanish Flu, or the French Revolution to wrest the wealth out of the coffers of society's wealthiest 1% and put it into the pockets of the working man. There was a huge fall in inequality between the late 19th or early 20th century and the late 20th century. For the UK, the share of wealth of the top 1% was around 70%-75% from 1895 to 1906, but bottomed out at 15.2% in 1984.

There's not much we can do about a global pandemic breaking out, but if we don't want wars, state collapse or revolution, we ought to strive to ensure that inequality does not rise again to unsustainable levels. This is nothing to do with an ideological uravnilovka, a levelling-down of society for its own sake; all to do with avoiding social disturbances and bloodshed. Taxation, as Dutch historian Rutger Bregman said at this year's World Economic Forum in Davos, is the answer. Addressing the audience of billionaires, he said: 'It feels like I’m at a firefighters' conference and no one’s allowed to speak about water.' It is, all about paying tax. "The rest," he says, "is bullshit."

It's time to take a structural look at our tax systems. They stand on the cusp of major technological change, as the process of digitising financial transactions continue apace. I can envisage a situation in which all transactions are taxed at point of sale, and reported in real time. This is easier to implement in VAT (split-payment and real-time reporting fiscal cash registers) and PAYE than for corporation tax (CIT); companies have a duty to their shareholders not to over-pay tax - but shareholders should be mindful that tax revenues foregone to state exchequers through base erosion and profit shifting cannot be made up by charitable giving. Wheezes such as the 'double Irish with a Dutch sandwich', a tax avoidance technique employed by some corporates using a combination of Irish and Dutch subsidiary companies to shift profits to low- or no-tax jurisdictions, do not play well with consumers.

As consumers - and voters - gain a better understanding of how their societies function and are funded, egregious tax avoidance from household-name brands becomes less sustainable. But then governments have a duty to spend tax revenues wisely and not on their cronies or pumping public money into party-political propaganda.

On 19 February, we'll be holding a conference at the British Embassy in Warsaw bringing experts from Her Majesty's Revenue and Customs (HMRC) to talk about two aspects of taxation - communicating with taxpayers, and digitisation of tax systems. The audience will consist of Polish tax officials and foreign investors - the discussion should be interesting; I'm hoping for some fruitful exchange of best practice.

One key topic is the balance between fairness and simplicity. As Richard Hawthorne, deputy director of customer communications at HMRC says, if you strive to simplify a tax system, it becomes less fair; if your want to make it fairer, it becomes less simple. In Poland, one can see that a desire for fairness beats simplicity hands down. Every citizen, rich or poor, has the same onerous duties to fulfil regarding the tax authorities, including the annual completion of the PIT 11D tax form. In the UK, if you are an employee on a permanent contract (pay-as-you-earn), you may live your entire life without ever seeing a tax return form.

Another is language. The UK tax system has for decades been focused on improving the ease with which the taxpayer understands what is being requested of them. The Plain English Campaign, launched in 1979, has fought a successful battle with banks, lawyers, insurers, and yes, the taxman, to cement the notion that the writer's responsibility to be understood takes precedence over the reader's responsibility to understand.

The process of rewriting Britain's tax law began in 1997. The rewritten legislation incorporated easier-to-understand language, a more logical structure and shorter sentences, and the Plain English Campaign worked alongside Inland Revenue (as it was then) to make the necessary changes that would be incorporated across all official communications with taxpayers. The UK tax return form has earned its Crystal Mark for clarity. I can attest to this, having filled out my father's tax returns online twice in a row, and on paper the year before that. Unlike the Polish form, one can grasp exactly what the purpose of each question is and what answer is expected.

Simplifying the language used to communicate with taxpayers has clear advantages. In an experiment conducted by the Polish tax authorities (supported by experts from the World Bank) in western Poland in 2015, a letter chasing overdue tax payments, written in straightforward Polish, proved to be 30% more effective than one worded in the traditional way. Yet this experiment remained an experiment. Last year, the Polish tax authorities promoted the notion of '3xP' - proste, przejrzyste, przyjazne - 'straightforward, transparent, friendly' as part of an overall shake-up of the tax system, intended to bring it up to date with EU standards and technological changes. Will that happen? Will missives from the Polish tax authorities cease to be written in the agentless passive? (example: 'zabrania się'). I have long been banging on about the need for a Plain Polish Campaign.

UK experience over the past 20 years shows that implementing a customer-centric approach, driven by clear communication, is not expensive to do and is a good investment in terms of improved collection. It does, however, require a massive change in thinking among all tax-office employees.

The technology issue is also of huge interest. On the one hand, we have seen the full implementation in Poland of the Single Audit File (Tax) ('Jednolity Plik Kontrolny'), and the elimination of most VAT carousels based on the automatic cross-interrogation of invoices. Real-time reporting is raising revenues from sectors where cash-in-hand transactions are the norm (from car washes to hairdressers). But on the other hand, there's the rise of cryptocurrencies like Bitcoin, being used to move money across border under the noses of the tax inspectors. How will this look in the future?

Tax is going to get a whole lot more interesting in coming years - the future stability of society rests upon it.

More about taxation in Poland from me here:

Modern governance for a complex world (Dec 2015)

I'm Payin' Taxes, But What Am I Buyin'? (Oct 2015)

More about Polish officialese from me here:

Translation and cultural difficulties (Apr 2015)

Orwell's Politics and Language and Poland (Mar 2012)

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Sticks, Carrots and Nudge - a Proposal

The British government's so-called 'Nudge Unit' is well-known among policy makers. The idea that giving citizens a slight nudge in the right direction rather than using proscriptive laws or behaviour-changing taxes - has taken hold in many governments.

I'd like to propose an idea that came to me as I hurried through St Pancras station this morning on my way to a meeting. I walk a lot - since 1 January 2014, my daily average has been 10,491 paces. How do I know this? At first, a pedometer, now replaced with an accurate health app in my phone, logged on a spreadsheet.

Walking is good for us, says the NHS, the World Health Organisation and the Surgeon-General of the USA. All set a target 10,000 paces (around 8km) a day. Now, I'm doing this. Thus reducing the costs of my long-term healthcare costs. And yet, paying into a healthcare system remains a one-payment-fits-all model. Now, I'm all in favour of those with healthy genes to subsidise the healthcare of those not so favourably born. But surely governments should be able to differentiate those who actively take care of their health, and those that neglect it?

To what extent could a carrot be offered to those prudent with their health?

Long-term research clearly shows the benefits of regular exercise. So how about - on a voluntary basis - offering a discount on monthly payments (National Insurance in the UK, ZUS in Poland) for people who agree to have their activity monitored?

I'd happily share data from my phone with the state to prove that I indeed walk my 10,000 paces a day. Connect my smartphone to a government server, and let it see my daily walking.

Furthermore - how about an incentive not to drive your car into town? My health app verifies my walking, but the GPS in my phone also shows that I travel to work exclusively by public transport. If a city can calculate the true cost of a commuter driving to town each working day, in terms of congestion, pollution and the opportunity cost of the real estate on which the car rests for eight working hours, then it can share some of that cost with citizens who forego the car.

All of this can be worked out these days by GPS, by ANPR (automatic number-plate recognition), by your health app in your phone or watch, by public transport revenue-collection equipment such as Metro gates. The technology is easy.

As well as penalising those who insist on driving with a congestion charge, paying the rest of us a decongestion reward would be beneficial in the drive to unclog our cities.

More and more commentators and futurologists are talking about taxing the robots and artificial intelligence systems that will take over so many jobs in our economy over the next 20-30 years. From those taxes, a basic citizen's income (already under discussion in countries like Switzerland and Norway) can be paid. And this tax can be tweaked by the value that a citizen adds to their economy.

Behavioural value - leading a healthy lifestyle, polluting less, recycling more, activities that are useful to society and to the environment should not go unrewarded. Behaviour can be monitored, and - provided this is done with the citizen's consent - good behaviour should be turned into monetary reward.

How does that sound?

This time two years ago:
London vs. Warsaw pt 2: the demographic aspects

On defamation and taxation

The Polish Anti-Defamation League (foundation council member: Poland's culture minister Prof. Piotr Gliński) published an open letter to EU Commissioner Günther Oettinger, accusing him of defaming Poland. I want to focus rather on the fifth paragraph of this open letter:

"The Polish government aims i.a. to introduce a tax on international corporations because most part of them don’t pay taxes in Poland and 5 percent of GDP is illegally transferred abroad."

The blunt assertion is as follows: the bulk of foreign direct investors here in Poland ("most part of them") don't pay taxes. And $27.5 billion (of Poland's $550 billion GDP) is being transferred abroad, in breach of the law. Is this true?

Let's think about this for a moment. Back to basics time. Economics 101.

Do we know how much capital has been invested in Poland by foreign companies? Around $200 billion since Poland's transformation, says the Polish inward investment agency PAIiIZ. Do we know how many jobs have been created in Poland by foreign companies? Directly, around two million. Indirectly (suppliers, subcontractors etc) another 1.5 million.

Does this matter? Don't these jobs count? Or is the Anti-Defamation League just using flimsy populist arguments to win favour at home?

Let's get down to business.

What is VAT? It is a tax. It is paid by just about every single foreign investor in Poland on their transactions in Poland. You sell a product or service, VAT gets collected and paid.

What is ZUS? It's called 'social security' but it is a hypothecated tax, to be spent on unemployment and disability benefit and pensions. You employ people, you pay their ZUS.

What is PIT? Personal Income Tax. It is paid by the employer to the state for every employee on a full-time employment contract.

In other words, even Amazon, Apple, Facebook, Google, Starbucks - notorious non-payers of Corporate Income Tax (CIT) in the UK - pay tax in Poland. OK, they may well be wriggling as hard as their tax advisors will let them to avoid CIT through arcane manoeuvres such as transfer pricing or base erosion and profit shifting, but they do employ people here and sell services and get taxed on these activities in Poland. So while they don't pay all the tax they should, they can't avoid all of it.

It irks me greatly that last year Facebook paid less tax to the UK Treasury than my nonagenarian father did (£4,500). But Facebook did this legally. It's up to governments to close tax loopholes. Corporations have a duty to their shareholders to maximise returns on investments. So if it's legal - they will do it.

I've explained before how profit-shifting (or transfer pricing) works but let me do it again. Company X makes €10 million profit in Poland. To avoid this getting taxed at 19% (Poland's CIT rate), a subsidiary of Company X's US, UK, French, whoever, parent company, based in Liechtenstein or Ireland for example, issues Company X with an invoice for, say, €9.8 million, for the rights of using the brand 'Company X' in the territory of Poland. Or for 'management fees'. Or whatever. The €9.8 million goes to Liechtenstein, where an office employing two people makes a vast amount of profit from Company X branches around the world, and gets hit with a tax invoice from the government of Liechtenstein, not for 19% or 20%, but a mere 12.5%.

This will only get sorted by international cooperation (within the OECD, for example). On the one hand, countries should have the right to set their own tax rates. On the other, egregiously low tax rates encourage the shifting of profits to a country that taxes profits at lower rates. But individual countries waging war on their own against corporates are tilting at windmills.

Foreign investors have benefited Poland greatly over the past 26 years. They have invested in buildings - factories, offices, retail centres; in people - spending billions on training; and in machinery. OK, they can always up sticks and go elsewhere. They can take their machinery - but they can't take the buildings nor the skills they've left behind.

And what does the Polish government want to do?

Aim new taxes, based not on profits, which can be artificially reduced, but on turnover, which can't, at two categories of foreign investors - banks and retailers. What will happen? Banks will simply shift the burden to their clients and customers. Higher margins, more for cash machine withdrawals, a bigger handling fee for arranging loans, etc etc. Banks have their ways of clawing back lost revenue.

But the retailers - they will pass the losses on to their suppliers. On to Polish manufacturers, farmers, wholesalers. And their employees and their families. In an era of negative inflation and cut-throat competition, retailers cannot simply raise their prices - they'll lose market share.

In other words, this attack on foreign investors who come to Poland and steal our money is a) misguided and b) likely to backfire.

But this is not to say there's not a problem. Poland is suffering from money leaking out in illegal ways. It's just that it's not the multinational corporations that are doing this. They cannot afford to do illegal stuff. If the law says you can avoid paying tax by doing this, they will do this. So how much money is leaking out of Poland, and who's behind it?

May I direct my readers' attention to this report from Global Financial Integrity. It looks at illicit financial flows from developing countries from 2004-13. In those ten years, the study suggests that $9 billion was illicitly taken out of the Polish economy, putting Poland 20th in the global ranking of countries from which money is being stolen. $9 billion over ten years averages $900m a year. Now, according both the IMF and the World Bank, Poland's GDP in nominal dollar terms in 2014 was $550 billion. So the $900m a year stolen from Poland represents around 0.16% of the country's GDP, nowhere near the 5% 'illegally transferred abroad' that the Polish Anti-Defamation League claims.

Much of this $9 billion is carousel VAT fraud, 'firma słup, puste faktury' - this is Pan Heniek rather than large multinationals. And then there's trade mispricing, and money laundering. And excise duty avoidance. Smuggled tobacco, alcohol and fuel - mrówki on a massive scale, many operating with the connivance of our big eastern neighbour. It is not Pani Halinka's bar mleczny across the way that needs a kontrola skarbowa if the Polish state is to collect the revenues it's missing out on.

If corporations are abusing tax loopholes to transfer more than their fair share of profits abroad, the answer is not to lay a rather poorly planned turnover tax on some them, but to tighten up tax law in cooperation with other tax jurisdictions, within bodies such as the OECD. This requires some serious expertise, not a knee-jerk reaction intended to please the nation's disgruntled.

Using such weak, unresearched arguments against putative defamers of Poland will cut no ice with them. In the meantime, let's keep correcting those ignorant editors who write about 'Polish death camps'.

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Jeziorki under water

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In a nutshell - the best science book I've ever read

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Pre-dawn Ursynów

Modern governance for a complex world

It's been three centuries since the last human being to claim to know everything - Gottfried Wilhelm Leibniz - died. Since the death of this remarkable polymath, I doubt that there's anyone today who'd claim to know everything about even one discrete area of knowledge, from microbiology to astrophysics, from neurology to genetics. Our known universe is becoming more complex at an exponential rate; the more we get to understand, the more it becomes apparent that whole new swathes of the unknown open up to us.

And so it is with government.

It all seems so complex, the business of running a state! Yet it should be so simple... Voters, disgruntled with this or that, were taken in by promises of 500 złotys a month child benefit, free prescription medicines for the over-75s, increased minimum wages, earlier retirement, etc, etc. How this was then to be delivered - well, the voters trusted the promising party to deliver. PiS has been busy sweeping out the corrupt old cronies from power, rearranging government departments to suit its world view - and suddenly the party leadership (J. Kaczyński, esq.) has realised that promises rashly made to win elections have to be paid for somehow, and that this is a lot more difficult to deliver than to promise.

How to do it? Collect more taxes! From the evil banks! From foreign supermarket chains! Making the VAT system watertight! Except once the new government got to grips with the detail, the complexity of the world we live in today became apparent. Impose a tax on the banks, and they will simply raise their margins for loans and cut the interest rate on deposits. Who suffers? The citizens, small business. Supermarket retailing is a cut-throat, ultra-low margin business. Impose a turnover tax that's higher than the margins the supermarkets make, and they'll pass that on... not to the consumer, but on to the suppliers. Small businesses once again, bakers, dairies, farmers, who'll get squeezed even further, passing the pain onto their workers and subcontractors. And meanwhile, the amount of tax raised fails to meet the costs of all the promises made.

Collecting VAT. Yesterday I read a report by PwC into Polish VAT. This year, the consultancy estimates that the Polish state will miss out on 53 billion złotys of foregone revenue - uncollected VAT - from the grey sector. This sum represents 3% of the Polish GDP. All those garages (warsztaty), builders, dodgy petrol stations, smuggled cigarettes and alcohol.

Now, 53 billion złotys is more than enough to pay for all of PiS's election promises and then some more. But saying 'we'll collect all the taxes' and actually doing it are two different things. It can be done to a much better extent than at present, but no government can totally close down the grey sector.

There are two approaches to making the VAT system more watertight. One is the modern way - digitise, digitise, digitise. You buy a woollen hat with a debit card for 123zł. Instantly, 100 złotys travels electronically from your bank account to the merchant's bank account. And at the same time, 23 złotys goes to the taxman - the Value Added Tax. This is called 'split payment' and it works already in Czech Republic and a few other advanced economies. Digitising tax collection also allows for the reconciliation of invoices in real time, business managers will no longer have to wait for the end of the month for visibility of sales figures, costs, taxes and post-tax profits.

The PiS approach to tax collection, I fear, will be different. More tax inspectors will be hired. A Big State must be protected by a Big Army of administrators. The tax inspectors will descend on hapless owners of newspaper kiosks at 01:30, they will go through mountains of VAT receipts and invoices and check the cash register and interrogate the kiosk owners and discover, and the end of a month-long investigation, that the kiosk owner has underpaid VAT that month to the tune of 37 złotys. The cost of the investigation, however, was 5,000 złotys. The kiosk owner is prosecuted, quits the business, no one is bold enough to step into their place, and another light goes out.

Tax inspectors will need to be inspected. "Ile mam dać, aby nie dać?" And of course, the inspectors of tax inspectors will need to be carefully monitored. And so on. Paralysis will happen - or else the whole thing will just blow apart - the human factor - and we're reduced to the level of Russia.

Digitising tax collection is the way forward. Clever algorithms can cross-check e-invoices (in .xml rather than dumb .pdf files) against payments, reconciling revenue with tax payments. Algorithms cannot be bribed. They will instantly show anomalies, mistakes, outright tax evasion. [Please read this blog post from October about the relative inefficiency of the Polish tax authorities. It costs 1.60zł to raise 100zł of tax in Poland; it costs 73p to raise £100 of tax in the UK. Too much chasing grosze, not enough strategy and digitalisation.]

Tax collection should be made as easy as possible, and it needs to go online. Pre-filled tax returns, where an ordinary citizen on an ordinary work contract merely clicks to accept a tax return form where their monthly income and tax payments have already been entered.

If we look at how well banks and airlines, to name two industries, have digitised, as citizens we should be demanding that the state does likewise.

But to get things done, companies - and governments - needs a strategy and good execution. Od ogółu do szczegółu - from the big picture down to the detail. Ministers must formulate and articulate; the civil administration must make it happen. All this requires high quality human resources. Properly motivated, trained and experienced. I cannot see this happening here.

The British example is interesting. As Chancellor of the Exchequer,from 2010 to 2015  George Osborne reduced the size of the UK public administration by half a million people. At the same time, private sector employment grew by over two million. Front-line service numbers - doctors and nurses, policemen, teachers - were not cut. The tax administration was, however, slimmed down still further and now is to be consolidated into regional centres with local tax offices being closed down. The Inland Revenue and Customs & Excise - two separate bodies - merged in 2005 to form Her Majesty's Revenue and Customs. This is something Poland should do, in particular given that so much excise duty (again, fuel, tobacco and alcohol) not being collected because of a lack of cooperation between the tax authorities (responsible for VAT) and excise duty collectors.

Will Poland's new government modernise its tax system? I fear not. The hope that 'at least grown-ups are in charge of the economy' seems to be fading on a rising tide of Kaczyzm, an ideology based on a world-view from the past century. Public administrators that are replacing the 'old corrupt elite of cronies' are somewhat lacking in relevant experience. Closed to the outside world, to new ideas, without any concept of how complex the issues that face the modern state are, I fear they have no frame of reference, they are like children who wander into the middle of a movie.

Choosing an IT provider to digitise something as huge and complex as a medium-sized nation's tax system will be a nightmare. It's much tougher than choosing a tactical transport helicopter for one's army. There will be mistakes. They will be costly. But it has to be done if taxes are to be collected effectively.

My fear is that this government is becoming paralysed by the fear it has generated itself. It will show itself to be inept. Laughable. Decisions made will be rash, the fallout painful. If taxes cannot be collected efficiently and the system cannot be made more watertight, democracy will falter.

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Muddy Karczunkowska

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This time five years ago:
Matters of style

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I'm Payin' Taxes, What Am I Buying*

Monday's Rzeczpospolita somewhat belatedly broke the news that of all the 55 countries surveyed by OECD, the rich economies' club, Poland is third from bottom when it comes to the efficiency of its tax system. The information comes from OECD's Tax Administration 2015 survey, published... in August. The fact that the news has only made it to the front page of Poland's newspaper of record is either testament to the fact a) that OECD's press office is not particularly effective or b) that Rzeczpospolita's journalists are slow in picking up stories or c) that it's coming up to election time.

Anyway... The point is this. According to the OECD report, in the UK it costs 73p to collect £100 of taxes. In Poland, it costs 1.60 złotys to collect 100 złotys of taxes. In other words, Her Majesty's Revenue and Customs is more than twice as effective  as Poland's Urząd Skarbowy. Of the 55 countries surveyed, only Japan and Saudi Arabia performed worse than Poland.

The reason is clear to all who pay taxes in Poland and have any dealings with the Polish tax authorities. There's far too many resources wasted on chasing small amounts of money - tax inspections of small businesses that end up costing tens of thousands of zlotys in staff time and letters and court costs etc - and the poor entrepreneur turned out to have diddled fiskus (intentionally or otherwise) to the tune of a few hundred zlotys.

Poland's tax regulations are opaque and they are interpreted differently in different tax offices across Poland. One may say - "Yes, that's a legitimate business cost", another may say "No - you are trying to fiddle the State - we'll see you behind bars for this you hochsztapler, you!"

As anyone who's faced a tax inspection in Poland (as I did back in 2001), it is a stressful time. You really don't know what the outcome will be. With the best will in the world - and with the best tax experts by your side - the decision is a coin-toss. All down to interpretation. No clarity. No website that will inform you.

[Incidentally - what's the current VAT registration threshold in the UK? Click here, then here then here and within three intuitive clicks you are finally here, and you know it's £82,000. Now try the same thing for Poland... Start here - and I challenge you to find the information. Go on! I challenge you! I clicked 19 times before giving up. Can you find out what the VAT registration threshold is in Poland in less than 19 clicks?]

In the UK, demonstrating a lack of ill-will, a desire to help and basic honesty, coming clean to HMRC saying - "I made a genuine mistake here, based on my misunderstanding of x", followed by the correct payment, will see you right. In Poland, the entrepreneur in this situation may find himself dragged through the tax tribunal, his business destroyed, his workers without jobs - and at the end of the day the supreme tax court says that he was in the clear all along.

HMRC employs 63,800 people - roughly one person per every 1,000 UK citizens. Poland's tax office employs 48,800 people - roughly one person per every 750 Polish citizens. We clearly need to be more tightly controlled because we can't be trusted.

This control costs money. More inspectors - so what do they do? They inspect. These inspections often cost more than they bring in, because there's less focus on the big picture, an inability to see the wood for the trees. And inspectors, being only human ("Ile trzeba dać, aby nie dać?") need to be monitored, and those monitors themselves need to be checked for clean hands.

But has been progress. Should anyone in Rzeczpospolita think that publishing this damning indictment of the PO government's lackadaisical approach to reforming the tax administration will damage their chances at the polls, may I point out that the one zloty sixty it currently costs to bring in 100 złotys of tax revenue compares rather well to the situation when PiS was last in government (1.94zł/100zł in 2005 and 1.76zł the following year).

Poland deserves a better functioning state. In many areas, the private sector has overtaken its peers in Western Europe when it comes to competitiveness and even productivity. But the dozy urzędy need to move with the times and implement best practice - if the UK, a more populous country, a bigger economy, can collect taxes twice as cheaply as Poland does - it means there are lessons that can be learned.

On the same day as Rzepa led with this story, it emerged that Facebook paid less tax in the UK than my nonagenarian father, on UK sales of £105m. Now, while the social media company has stayed within the letter of law, the ethics of shifting costs from one country to another with a lower corporate tax rate is deeply questionable. I for one will stop using or visiting Facebook until such time as the company pays the full whack of UK corporation tax on its UK sales. Shifting profits offshore as transfers to other subsidiaries within the same group to pay for 'management costs' or 'intellectual property' or 'trade mark use' is plain bullshit and should be stopped by governments. Tax rules drawn up for the industrial age need to be urgently revisited.

* A great tune by The JB's...



This time four years ago
One stop beyond

This time five years ago:
Who am I? (Kim ja jestem?)

This time six years ago:
First snow, 2009. Ghastly!

This time seven years ago:
Train links to town improving

This time eight years ago:
A beautiful Sunday, south of Warsaw

The second Summer of Cider

Wow - cider is becoming big news in Poland. Last week in Auchan, looking for the cider among all the beers where it used to be, I saw none. "So much for continuity of supply," I thought before spinning round and seeing that amount of shelf space being used for displaying cider had doubled yet again. "Hello - what's this? It's Weston's Old Rosie! And this - what's this one? Why, it's Henry Weston's 2013 Vintage Oak-Aged Herefordshire Cider. And of course Polish ciders - a novelty only last year - Miłosławski, Cydr Lubelski, Warka Cider, Green Mill, Joker.

Cider - as opposed to apple-juice flavoured beer (YEEUCHH!!!) has caught on in Poland at a pace most fast-moving consumer goods companies daren't imagine. Back in January 2013, the Ministry of Finance reduced the excise duty on ciders below 5% alcohol by volume to something approximating the duty on beer (stronger ciders are still being treated as wine, excise-wise). This gave Poland's fruit wine manufacturers like Ambra and Warwin the opportunity to shift their client base from rural alcoholics to urban hipsters. At around the same time, a change in the law was made to encourage the production of artisan ciders by Polish apple-growers, though limiting production to 10,000 litres of farm-produced cider per year. The new law is so complicated in practice that out of Poland's 60,000 apple growers, only two have taken advantage of the new opportunity.

The main problem is the banderola, or excise band. By law, this has to be glued over the bottle top as proof that excise duty has been paid. A 7.8% beer is exempt from the banderola, a 4.5% cider isn't. ABSURDITY! The small, craft-cider makers have to sell their own cider, duty paid, in huge containers, to bottling plants that can affix the banderola, and then buy back their own product, now bottled and banded, for further sale. And a further absurdity is that while it is perfectly legal to advertise a 5.2% beer on a billboard or on TV, it is illegal to advertise a 4.5% cider. Can a government spokesperson explain WHY?

If the Polish government were to liberalise these foolish regulations, cider-making in Poland could take off. Scores of local craft cider makers would spring up, making (as they do in England), fine single-apple variety ciders, creating local employment and developing new skills and new markets. Poland - the world's second biggest apple exporter, and Europe's biggest apple grower, instead of shipping tanker-loads of apple-juice concentrate to England where it is converted to cider, could be making cider here instead. If only the Ministry of Finance* would treat cider exactly as it treats beer.

Please feel free to turn this into a social media campaign!

So then - Mr Dembo's Cider Sensations for the Summer of 2014...

From Poland - Cydr Ignaców. One of the 10,000-litre limited craft ciders. Splendidly balanced, semi-dry, semi-still, this is rated as the best cider made in Poland, made by enthusiasts in Ignaców, some 15km south-west of Grójec, right in the heart of Poland's apple country. Last year's vintage is available (5% abv) in small, 275ml bottles. One to savour. Already becoming available in the UK.

Next up we have Jabcok Maurera (left). Jabcok (pron. 'YUBtsok') is a slang expression for cheap apple wine; a nice touch of self-deprecating humour on this quality product selling for 13zł. I found this one in an organic restaurant in Służewiec Przemysłowy (on ul. Postępu). This one, like Weston's Old Rosie, is cloudy; naturally-occurring carbon dioxide adds slight fizz. Stronger at 7.7%, a fine cider that captures the taste of rural cider-making in England. Maurer is from southern Małopolska, not too far from juice-maker Tymbark.

Turning to English ciders available in Poland - I must say that Old Rosie (not cheap at 17 złotys for 500cl) is excellent. One of the very best I've ever tried. Other Great British ciders you can find in Poland include Sheppy's Single Variety range (Oakwood, Dabinett and Kingston Black are three I tried; all are excellent and as different from one another as a Merlot is from a Shiraz). The Westons' ciders are imported by Kamron s.c.(www.kamron.pl), the Sheppys' ciders by BRN Services (www.ciderhill.pl).

If none of these are available, I go for Cydr Miłosławski, failing that Warka's Cider and Perry are generally available, as is Cydr Lubelski. Both Warka and Lubelski are extending their brands - Warka has launched 'Double' cider and perry (both 8.5%), while Lubelski has broadened its range of one with a honey-sweetened cider.

If Poland's restrictive regulations and excise duties on cider were to be brought into line with those for beer, Poland has the potential a) to become a big importer of excellent English ciders, and b) learn how to made excellent cider for domestic pleasure plus export to all points north, east and south!

* I learn it's not the Ministry of Finance that's against liberalising cider sales further - it's the Ministry of Health, leaned on heavily by PARPA (the state agency for solving alcoholic problems) that says not one step further in the direction of making any alcoholic drink more accessible or socially acceptable.

This time last year:
North Wales in the sun

This time two years ago:
Back at Penrhos

This time four years ago:
A farewell to Dobra

Public transport cheaper for Varsovians

The proposition is a controversial one - if you live and pay your taxes within the boundaries of the Capital City of Warsaw, you will be able to benefit from cheaper public transport from the New Year. The price of a quarterly city card (Karta Miejska) goes up on 1 January to 280 złotys from the current 250zł. If you are a Warsaw taxpayer, it stays the same. So 30zł x 4 = 120zł saving in a year = worth doing. If on the other hand, you live just the other side of the city's borders (in Nowa Iwiczna across the fields from Jeziorki, for instance), you will pay full whack. Even if you work in Warsaw, or own a business in Warsaw employing people who live in Warsaw.

Is this fair? Yes - to a point. However, I believe that long-term, Warsaw, along with its nine neighbouring poviats (districts), needs to be broken out of Mazowsze to form a voivodship (province) of its own. This would immediately plunge the rest of Mazowsze into statistical poverty and entitle Radom, Ciechanów, Siedle, Ostołęka and other poor towns of the region to EU schemes to help raise their developmental status. Because these towns are in the same EU region as wealthy Warsaw, Mazowsze's GDP per capita is above the EU average, so no special support for them...

But back to the card. If you contribute financially to the city's upkeep by paying taxes here, you will have additional benefits in the form of travel prices frozen at this year's levels.

Getting this sorted is easy. You go onto ZTM's excellent website, find the relevant page (even in English), fill in the details, and ticking the box in which you give permission to ZTM to approach the tax authorities to check that you are indeed a Warsaw resident and taxpayer. When this has been done, you receive an e-mail or SMS that your hologram is ready. You then go to the ZTM office most conveniently located to you to collect the hologram, which is then applied to your city card. Once you have the hologram, you are entitled to cheaper public transport.

...

Warsaw's public transport authority, ZTM, has a new full-time boss in place, it was announced last week. He is Wiesław Witek and he replaces Leszek Ruta, a man I believe to have been unfairly relieved of his duties as a political sop to the voters in the run-up to October's referendum to oust the mayor, Hanna Gronkiewicz-Waltz. [An appreciation of Leszek Ruta's work at ZTM here.] Speaking to Mr Ruta back in 2011, he assured me that ul. Puławska would have a bus lane running up and down its full length once the junction with the S2 Southern Warsaw Bypass was opened. Well, he's gone so I can't hold him to his promise. But will Mr Witek return to the idea of a bus lane for Puławska? I must say, that since the S2's junction with Al. Jerozolimskie was opened, traffic has loosened along this crucial artery leading into the city centre from the south of Warsaw.

This time last year:
Swans on ice

This time two years ago:
Cars

This time three years year:
What's the English for kombinować?

This time four years ago:
The demographics of jazz

This time five years ago:
A day in Poznań

Red tape and travel

To Kraków, to speak at yet another conference about PPP. I'm being paid by the organiser, by way of EU funds, so to reclaim my travel costs there and back, I need to present not just a ticket, but a VAT receipt (faktura VAT). Now, when queuing for a railway ticket, there's nothing more annoying when you're in a hurry to catch your train, to find the guy in front of you asking for a faktura VAT to go with his ticket. You know it will take an age.

So thinking of my fellow travellers behind me in the queue, I chose to buy my tickets from the main booking hall at Dworzeć Centralny (a.k.a. W-wa Centralna, or, as the English voice-over man on Warsaw buses and trams helpfully says, 'Shentroo wailway shtayshen'). Here, rather than a single queue as there are to the ticket windows in the underground passages beneath Centralna, there are two queues each serving six windows. The system is efficient and quick. The 16-person ahead queue of me evaporates in just eight minutes, with five of the six windows open.

It's my turn; I step forward. A sign at the window asks me to a) inform the ticket clerk if I wish to pay by credit card and b) inform the ticket clerk that I require a faktura VAT before ordering my ticket. Nice and clear. So now I make my request. "Ticket to Kraków Główny, InterCity, second class, departing Warsaw today at 16:30; return from Kraków to Warsaw, TLK, tomorrow at 20:04." And, of course, my faktura VAT. I cast an anxious eye around me, but the other four windows are functioning fine, no one can accuse me of being a zawalidroga (lit. road-blocker).

The lady behind the window is quick and efficient. Using an eraser-tipped pencil, she taps in the details of the conference organiser (company name, address, tax number) onto her computer screen.

And now, the fun starts. I have ordered four pieces of paper – my ticket there, a seat reservation, my return ticket and another seat reservation. Each one of these four pieces of paper requires THREE copies of the faktura VAT. One for my purposes (which I'll pass on to the conference organiser), one for the railway, and one for the tax-man. So that's 16 pieces of paper to print – from an ink-jet printer.

In my mind's ear, I can still here its eternal 'drrrrrrrrrrrr-drrrrrrr-drrrrrrr-drrrrrrrr-drrrr-drrrrr' as twelve individual faktury VAT are being printed. The ticket lady piles up the papers – these for me, these for her, these for the tax-man. Finally, she hands my tickets and faktury VAT, files away the others – I look at the clock – a nine whole minutes have elapsed since I stepped up to the window. Nine minutes of her time, nine minutes of my time. Is there no better way?

I look over the paperwork in my hand. Of the eight bits of paper I get (two tickets, two reservations, four faktury VAT), one is for the reservation of my seat for the TLK train back to Warsaw. It is to document 37 groszes' worth of taxation (seven pence), for a service for which I'm charged five zlotys (just under one pound). Seven pence, documented physically, on paper, three times. How many more human hands and eyes and brains will have to check those three faktury VAT? At the offices of my conference organisers, within PKP, and by platoons of bookkeepers and tax-men, in Kraków, in Warsaw and in Brussels. Activity that adds no value. Deep pools of economic inefficiency.

Surely, in today's world of iPhones and tablets, WiFi, NFC and RFID, PayPass, PayPal and online banking – surely, there is a more efficient way of collecting and accounting for taxes paid? In my previous job, in a multinational company that published hundreds of classified advertising papers and websites around the world, the corporate HQ people could not believe that here in Poland out of 87 people employed by the firm, 31 of them worked in accounts. In countries like Sweden or Holland, where turnover was several times higher, the accounts staff numbered three or four people. In Poland, where VAT is still calculated and paid in full each month by all but the smallest businesses, it is still about the manual checking of hundreds of millions of faktury VAT, many of which are for tiddly amounts of money that wouldn't merit any paperwork whatsoever in other OECD countries.

Poland has one of the most expensive and inefficient tax systems in the EU in terms of revenues collected. Is it just about the protection of armies of bookkeepers' jobs, whose soul-destroying task is to account for evidence that tiny sums have all been duly collected? Or is it an inability of middle-ranking bureaucrats to move with the times and actively seek out and implement more efficient ways of doing things? Or is it to do with low levels of social trust? That without the policing mechanism of faktury VAT, Mr Dembinski would be hanging around railway stations, dipping into dustbins to retrieve discarded train tickets, then presenting them as his own, while meanwhile making his way to Kraków on foot, so as to diddle the conference organisers (who would then be unknowingly be diddling the tax-man)?

It is time for Jacek Rostowski, Poland's UK-born and -educated finance minister to apply some big scissors to this grotesque paper-printing and accounting machine that adds no value to the Polish economy. Time to apply the Toyota method – identify the muda (activity that adds no value) to the process and cut the costs of tax collection, with a target to get them at least to the EU average.

A campaign to streamline Poland's antiquated tax-collection system should be supported by every citizen and each political party - the only people who would lose would be the armies of faktura counters - but for the rest of the economy, it would be a dead weight removed from the nation's neck.

This time last year:
An end to an Entitlement way of thinking

This time two years ago:
West Ealing - drab and sad suburb

This time three years ago:
To Poznań by train

This time five years ago:
Late autumn drive-time