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The people of Poland are about to discover the blessings of the free-market system.

Along the way they will get to know its unloved associate, the capitalist heavy, the guy who does the dirty work.

They will get to know the tax man.

Recently, a Buffalo tax expert visited Poland to help the government lay out a free-market tax structure.

An efficient and fair taxation system is a key to Poland's future, said Donald C. Lubick, a prominent attorney and former U.S. assistant secretary of the treasury for tax policy.

"I was very impressed with them," Lubick said of Polish officials. "They were really well versed in the subject."

But he said foreign advisers can provide a voice of experience in tax policy and implementation that is unavailable in the fledgling market economy.

Lubick said a well organized tax system is essential because the government will need operating funds, the people will need social services and businesses and farms will need to be subsidized.

Adjustments in the structure of Poland's income tax are needed to account for inflation, estimated by the government to exceed 1,000 percent annually.

He said social protection must be provided for the growing number of unemployed -- presently 400,000 compared to practically none a few months ago.

And Poland's list of chores includes an extensive and long-neglected environmental cleanup.

Lubick's discussions with Vice Premier and Finance Minister Laszek Balczerowicz and his deputies centered around individual income tax. However, a combination of taxes will be implemented, he said. These will include a value-added tax, a retail tax, a progressive income tax and probably property taxes.

As important as the revenue raised is finding the right combination of different kinds of taxes to raise it, Lubick explained.

"It's a question of combining economic efficiency and economic fairness," he said.

Lubick referred to the idea that the smaller an individual's earnings or revenues, the more is spent proportionally in retail taxes. The progressive income tax could be used to help balance that, he said.

"I'm sure it will be adopted. They're not prepared to dismantle completely their social outlook," he said.

Lubick said the Polish government is shooting to put the new tax package into effect by the first of the year.

A partner in the Buffalo law firm of Hodgson, Russ, Andrews, Woods & Goodyear, Lubick was invited by the Harvard University Institute of International Development to represent it in discussions with the Polish finance minister.

One of the many key changes that will be sewn into Poland's new economy will be a single value-added tax, he noted.

"They're replacing a great variety of excise taxes on consumption with a single value-added tax to eliminate distortions of selective taxation," Lubick explained.

Selective taxation had allowed the government to "steer" people into particular purchasing choices. For example, taxes on automobiles might be lowered to increase incentive to buy automobiles.

As for the unemployed, tax revenues alone will not be enough to care for them, Lubick said. The country needs foreign aid. "They'll have to provide unemployment benefits," he said. "I think we'll have to give them economic assistance to cushion that."

The Polish government also has a corporate tax in the works, he said, designed to make sure foreign investors "pay their share" of income derived from the country.

Government decentralization will bring another revenue-raising innovation for Poland, Lubick predicted. "They've had virtually no operating system of local government," he said. To finance the local governments, "they are going to need to have local government taxation."

Poland's economic reforms are the most ambitious in Eastern Europe. In January the government scrapped subsidies and price controls.

"They are really going cold turkey," Lubick said. "They're following the thought that you can't do it gradually if you're going to have price stability and foreign investment."

He said the tax system is just one part of the equation.

"It's probably one of the easier problems," he added. "Banking, accounting, transfer of ownership -- these are serious problems."

Success will take preserverance. "They're going to have to work their way out of it," he said. "They have to increase production, work harder, consume less."

Lubick expects to continue consultation with the finance ministry on a number of issues on which it has sought advice. He hopes to assemble a team of experts to return for further work on design details.

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