In line with a demand from the European Commission, Poland will suspend its recently-introduced retail tax, the finance minister said on September 20. Warsaw is now working on a rejigged levy on larger retailers that will launch at the start of next year, he added.

Poland introduced a progressive tax on retail turnover at the start of September. The commission issued an injunction against the levy on September 19 on the grounds that it discriminates against larger retailers and therefore may constitute illegal state aid to smaller businesses. Warsaw, however, is keen to maintain its efforts to increase revenue streams for a budget strained by large spending programmes.

Finance Minister Pawel Szalamacha told a news conference Poland is working on a “different formula” for the tax. The government's hopes of raising PLN1.7bn (€400mn) via the levy, as is written into the 2017 budget, will not be changed, he added.

The planned revenue of over PLN470mn in this year’s budget is likely to evaporate before a new version of the tax take effect. Szalamacha admitted, despite saying Poland will fight for the suspended regime. However, that loss can easily be covered, he added.

The official criticised the EU exectutive for siding with lobbyists to help large retailers, who “for years have paid zero tax in Poland”. However, he did not discuss details of how Warsaw will push a rejigged tax on "big box" retailers past Brussels.

Under the now suspended regime, Polish retailers were supposed to pay a tax equal to 0.8% on monthly turnover of PLN17mn-PLN170mn. Chains faced an additional charge of 1.4% on turnover exceeding PLN170mn. Smaller retailers with monthly turnover below PLN17mn were exempt.

Despite the critcisms aimed at the EU, Poland has admitted that the bloc's action was not surprising. Brussels struck down a similar retail tax in Hungary last year. For the moment, Budapest is yet to resurrect the idea.

However, Hungarian Prime Minister Viktor Orban has a long track record as a pragmatist that picks his battles. Despite the developing bromance between the two, Poland's effective leader Jaroslaw Kaczynski is a committed ideaologue with a far more stubborn streak.

The retail tax is just the latest in a series pitching Poland's Law & Justice (PiS) governemnt against the EU inside its first 11 months in office. Efforts by PiS to consoldiate power have provoked ire in Brussels, leading to a long running probe into the rule of law in Poland, while media freedom and climate change programmes are other points of contention.