Poland hopes to reap PLN1.53bn (€345mn) for the state budget from its planned retail tax, the finance ministry said on May 24.

The government finally tabled its proposal for the levy on retail turnover on May 23. The ruling Law & Justice (PiS) is hunting revenue to power the flagship spending programmes it promised during its successful campaign for the election in November 2015, several of which have been delayed by mounting concern over fiscal management. Meanwhile, the tax threatens to have a spillover effect for Poland's farmers and food processors, who are already under pressure.

The finance ministry proposes to tax retail turnover exceeding a monthly cap of PLN17mn. Monthly turnover of PLN17-170mn will be taxed 0.8%, while that exceeding PLN170mn per month will be covered by a 1.4% tax rate, the ministry said in a statement.

The ministry forecasts the tax will net PLN638mn for the budget in 2016. The projected revenue from the tax in 2017 and beyond is expected at PLN1.53bn annually. 

The proposal will now be discussed by government, and then by the PiS dominated parliament. Analysts say they expect the levy will not be implemented September, as companies will have to adapt to the new environment.

Commodities such as natural gas or coal, fuels used for heating, as well as water, and medicines will be exempt from the tax, the ministry said. Sales over the internet will not be taxed. Companies paying the tax will also be entitled to deduct payments from their corporate income tax base.

The retail tax is also a measure to protect Polish retailers in a market increasingly dominated by large foreign-owned chains, the government claims. A similar tax was introduced in Hungary, only for the European Union to strike it in 2015 as unlawful. That has had Warsaw working carefully to avoid a similar fate for its levy.

Analysts at Erste predict that the largest retailers will be able to pass much of the cost of the new tax onto suppliers. That will not go down well with Poland's farmers and food processors, who are already under pressure due to the Russian embargo on EU food imports.