EU orders Poland to suspend retail tax

EU orders Poland to suspend retail tax
Poland claims its retail tax will help small businesses
By bne IntelliNews September 19, 2016

The European Commission has launched an investigation into Poland's new retail tax and ordered Warsaw to suspend the levy, the EU executive body announced on September 19.

Poland introduced a progressive tax on retail turnover at the start of the month. The Law & Justice (PiS) government is seeking revenue to drive the spending programmes promised in its successful campaign for last year's October election. The introduction of the charge was delayed by several months, however, as Warsaw sought a solution that would the same sort of action from the EU that saw Hungary forced to dismantle a similar tax last year. PiS has made no secret that it is keen to copy many elements of the playbook of Hungary's Fidesz government.

Just as with the Hungarian tax, the commission suspects the progressive nature of the Polish charge on retailers above a certain turnover threshold is discriminatory. “The commission has concerns that the progressive rates based on turnover give companies with a low turnover a selective advantage over their competitors in breach of EU state aid rules,” the EU executive said in a statement.

Poland’s ministry of finance admitted the injunction and the investigation are no surprise. “The ministry prepared a plan in case the commission [issued an injunction] and will present it during a press conference [on September 20],” the ministry said in a statement.

Striking within three weeks of the launch of the levy, the EU is clearly keen to clamp down on those hope swiftly. Warsaw said earlier this year that it expected to reap PLN1.7bn from the tax in 2017.

Under the regime, Polish retailers are expected to pay a tax equal to 0.8% on monthly turnover of PLN17mn-PLN170mn (€3.9mn-€38.9mn). Chains will face an additional charge of 1.4% on turnover exceeding PLN170mn. Smaller retailers with monthly turnover below PLN17mn are exempt. With the tax only having taken effect on September 1, no company has paid yet.

PiS has led Poland into a close relationship with Hungarian Prime Minister Viktor Orban. Both hold a single party majority and follow populist state-centred policies. Warsaw had claimed initially that the retail tax would help smaller Polish retailers compete with the international companies that dominate many segments.

The Hungarian tax was blasted by critics for being shaped to offer an advantage to large local business groups reportedly close to Fidesz. Budapest insists it still has plans to force retailers to help the budget, as well as sectors such as farming.

Orban was forced into another rare climbdown earlier this year as popular discontent pushed him to abandon a year-old ban on larger shops opening on a Sunday. Momentum on a similar move is gathering in Poland.