Estonian economist: Poland has grown from an ugly duckling into a swan
Estonian banker and economist Indrek Neivelt argues that Poland has overtaken Estonia in GDP per capita over the past decade and become one of the EU's most dynamic economies, pointing partly to its differently structured tax system.
Estonian economist Indrek Neivelt has compared Poland's and Estonia's economic paths over the past ten to fifteen years, concluding that Poland has made striking progress while Estonia has stagnated.
In 2014, Poland's GDP per capita by purchasing power parity stood at 68 percent of the EU average, compared with Estonia's 78 percent. Last year, Poland's figure reached 81 percent, while Estonia's remained around 79 percent — essentially unchanged from a decade earlier.
Visible development and lower prices
During recent visits to Krakow and Rzeszów, Neivelt observed extensive infrastructure development — new highways, renovated and newly built structures, and lively public life even outside the capital and beyond typical tourist centers. Restaurant prices, he noted, were at least a quarter lower than in Estonia.
Different tax structure
Poland's standard VAT rate is 23 percent, but basic food items are taxed at 5 percent, and many prepared foods and restaurant services at 8 percent, while alcohol and some other goods remain at 23 percent. The lower VAT revenue is offset by other taxes: Poland applies a progressive personal income tax, with an annual tax-free allowance of up to 30,000 zlotys, rates of 12 percent and 32 percent, and an additional solidarity tax for high earners. There are also tax benefits for people under 26 and for families with several children.
Neivelt noted that Poland has adopted its own version of Estonia's corporate income tax system, but with added restrictions requiring real business activity, such as a minimum number of employees, aimed at directing tax benefits toward genuine job creation rather than passive investment.
He added that Poland's success also stems from other factors — a large domestic market, EU investment, its own currency, and recent labor inflows — but argued the example shows rapid growth is possible even with a more complex, progressive tax system, and that Estonia should be more open to learning from other countries rather than treating tax simplicity as the only virtue.
