500+ benefit programme launches

A new child benefit programme will be launched later this week. Polish parents are more than happy, but can the budget handle it?

The 500 PLN per child was a key promise in the general election race won by Prawo and Sprawiedliwość [Law and Justice]. Now the ruling party are to show the public that they are keeping their word.

Work on the act introducing the new benefit started soon after the elections. The idea was consulted with finance experts. The body responsible for the project is Ministry of Family, Labour and Social Policy.

As the name suggest, the new benefit will be in the amount of 500 PLN for a child. However, to apply for the benefit, one must have at least two children (the benefit will be granted for the second and the following offspring).

Parents with only one child will not receive the money unless their family earnings fall below the threshold of 800 PLN per person (1200 PLN if there is a disabled child in the family). There is no maximum income threshold, which means anyone with two or more children can apply.

Through the introduction of the programme, the government hopes to lessen the burden of raising children, counteract negative demographic trends and also boost consumption.

Convincing Poles to have more children is the key issue here, but the government also hopes that increased spending will bring an increase in the VAT tax collection. VAT tax comprises substantial part of the state’s income.

Opponents of the initiative argue that Polish budget will not be capable of handling such heavy spending. 500+ will cost tremendous amounts of money and will definitely be a big administrative challenge. According to the Ministry’s estimates, only this year the programme will cost over 17 million PLN.

Where will the money come from? The ruling party is working on a new tax on sales. New legislation on tax on bank assets has already came into force about a month ago.

The government has also plans to raise more revenue from the existing taxes through fighting tax evasion and tax fraud. Due to such shenanigans, actual VAT tax revenue collected by the authorities is much lower than expected.

Experts warn that the new act will have negative effect on the labour market, as it will encourage women to stay at home rather than be out looking for work. The Ministry has already announced it will look into the issue.