Junior coalition partner issues ultimatum for ruling party

Poland's Agreement, a small ally within the United Right coalition led by the conservative Law and Justice (PiS) party, has said it may leave the coalition if its suggestions concerning upcoming controversial reforms are ignored.

Agreement's senior politicians met on Saturday to discuss the latest crisis in the United Right after one of their deputy ministers was fired by Prime Minister Mateusz Morawiecki after she contested some measures included in the government's comprehensive economic reform package, the Polish New Deal.

"We will not support tax changes, changes in financing local governments and changes in the media law if our postulates are not taken into account," Agreement leaders said in a statement after the meeting.

"We make our presence in the United Right dependent on that," the leaders added.

The Polish New Deal includes two major changes in the Polish tax system, but one of them raises the biggest controversy in Polish society.

On the positive side, the government-proposed tax changes include raising the tax-free allowance to PLN 30,000 (EUR 6,594) from PLN 3,091 (EUR 680) for middle-earners and from PLN 8,000 (EUR 1,759) for low-earners.

But on the negative side, the 9-percent healthcare insurance contribution will no longer be tax-deductible, which will raise the effective tax rate by the same percentage.

This could constitute an additional tax burden for entrepreneurs as well as middle- and high-earners.

Moreover, Polish local governments heavily depend on the personal income tax for their budgets, but under the new rules citizens would start paying their tax only on earnings above PLN 30,000, which would seriously dent local governments' incomes.

The government says it will make up for the loss, but some local governments fear the government may favour its political allies when distributing subsidies.

In the media law controversy, a group of PiS MPs have prepared a bill which some see as being targeted against the US-owned TVN24 television channel, which is critical of the government. The move has caused concern in the White House, and recently a group of US senators wrote a letter warning Poland to withdraw from the plans.

TVN24 has been struggling to renew its licence with the state media regulator KRRiT since February 2020. Its current licence expires in September.

In its statement, Agreement said it generally supported the Polish New Deal, but could not agree with the three reforms in their current shape and called upon PiS to amend the bills in a way to incorporate Agreement's suggestions.

"In each of the three cases we have presented concrete remedies to our coalition partners and we expect a debate on them," the party concluded.