Polish Companies' Debt Threatens Local Economies and Government Revenue

Companies in Poland are struggling with overdue payments, impacting local economies and government revenues, according to the latest data from the National Debt Register (KRD).

In May, 9% of businesses had unpaid invoices, accumulating to 11.6 billion PLN in overdue debt. The KRD created a ranking of districts based on the total debt of companies headquartered there, adjusted per 1,000 businesses. This method allows for comparisons between smaller and larger territorial units, also considering average debt levels and the percentage of debtors within each district.

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For municipalities to a lesser extent, but for districts and regions to a greater extent, revenues from CIT tax, which legal entities pay, are important. For all types of local government units, revenues from PIT are important, and sole proprietorships also pay this tax.

The Silesia region, known for its heavy industry, including automotive and machinery production, faces the most significant payment challenges. Companies in Wałbrzych and its surrounding district, as well as Bytom, report the highest percentages of overdue invoices. Sosnowiec leads the ranking for the most indebted districts, with an average debt of 54,700 PLN per company, and a total debt of 8.06 million PLN per 1,000 businesses.

Janusz Szewczuk, an expert from the Association of Polish Cities, emphasized the crucial link between corporate financial health and local development. He noted that local governments rely on corporate income tax (CIT) and personal income tax (PIT) – paid by sole proprietorships – for revenue. When companies struggle with payments, they have less capital for investments and job creation, which in turn affects consumer demand and the real estate market.

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Additionally, if companies are in arrears and do not service their obligations on time, they do not have money for investments, and often also for increasing the number of jobs.