Subsidies - Assistance In The Implementation Of Special Social Goals

To support sustainable development, countries also support each other financially by offering subsidies. The European Union, which brings together 27 countries, is a perfect example of how other countries support the weaker ones in this way.

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Definition

Subsidies - this is a non-repayable benefit provided to the beneficiary, subject to specific settlement rules, which is transferred from public funds (budget or local state) for the implementation of public tasks or other activities, the operation of which is considered expedient.

If they are not used or used but not in accordance with their intended purpose, they are subject to return. The beneficiaries may be both entities with and without legal personality, including state institutions, business entities, non-governmental organizations, international organizations, and natural persons. Subsidies are an instrument to support exports, most often of an indirect nature.

Subsidies as an instrument of economic policy are introduced to achieve a specific goal, usually social (equalization of wealth, protection of the poorest, equal opportunities) or economic (saving enterprises or sectors, stimulating the desired behavior of producers or consumers).

Types of subsidies

The following subsidies can be distinguished from the state budget:

• Purposeful - for financing or subsidizing commissioned tasks and own tasks of local government units, tasks commissioned to entities outside the public finance sector.
• Subjective - for co-financing the current activity of the entity indicated in the act
• Objective - for subsidies to certain types of products or services, for subsidies to interest rates on certain bank loans. Local government units may also receive subsidies (subsidies) from the state budget for the performance of tasks of a special nature, such as the removal of direct threats to public safety and order, and for the implementation of poviat tasks, services, inspections and guards.
• A special type of subsidization is a subsidy, which is a non-repayable financial aid granted to specific entities (institutions, economic or social organizations, natural persons), usually from the budget or extra-budgetary funds, in order to support their activities.

We also distinguish subsidies:

• Forbidden (red) - are harmful to both the importer and the exporter. Direct subsidies, government subsidies based on export performance, export rebates and credits, foreign exchange write-offs, more favorable freight rates, duty exemptions or refunds, and financial preferences are prohibited.
• Sanctionable (yellow) - these are production subsidies; cause harm by causing "serious damage" to the interests of another WTO member country.
• Allowed (green) - otherwise non-specific subsidies. They consist of:
  • support for backward regions of a given country - in Poland, regions are voivodeships; backward regions are those where the unemployment rate exceeds 110% of the national average or GDP per capita does not exceed 85% of the national average,
  • support for research work,
  • adaptation to the requirements in the field of environmental protection.

Classification of subsidies

Due to the way in which subsidies are granted:

• General subsidies - granted to all entities meeting certain conditions,
• Specific subsidies - granted only to selected beneficiaries.

Due to the entity providing financial assistance:

• State subsidies - granted as part of the economic policy pursued by a given country, i.e. industrial, commercial, agricultural, environmental, regional, social and cultural policies,
• Cartel subsidies - they are granted by the cartel to its members based on its pricing policy, these subsidies are intended to compensate for keeping the price of a given product at a sufficiently low level.

Due to the form of providing financial assistance, the following are distinguished:

• Bonuses - the beneficiary receives funds directly,
• Incentives - are an element of the regulatory system created by the state, which enables obtaining financial resources, by e.g. reducing expenses incurred by enterprises for the state, creating insurance and guarantee funds, a policy of limiting or freezing wage increases, applying duty reliefs and tariff rates , diversified exchange rate policy, facilitating access to markets and production factors, technologies and techniques, and others.

Subsidy problems

EU funds, as well as other subsidies, are often used inconsistently with the specified rules, because they lead not to aid, but to economic benefits for entrepreneurs.

Source: Woźniak M. (2011) Prace z zakresu polityki przemysłowej i ekologicznej, investopedia.com