EU opens an investigation into Polish retail tax

The European Commission suspended the retail tax that was recently introduced by the Polish government. The press release published on Monday states the institution is concerned that the new regulations may not be compliant with EU laws.

According to the new tax provisions, all Polish retail businesses in have to pay a levy on their turnover at the rate of 0,8% for sales below the threshold of 170 million PLN or 1.4% for sales above that level. Taxpayers with turnover not reaching 17 million PLN are exempted from paying the levy.

In practice this means larger retail chains will pay more tax. Smaller outlets, often run by a single owner or a family, will also have to pay the levy, but it is to hit them to a much lesser degree. The European Commission believes the construction of the tax leads to unfair treatment of some enterprises.

EU member states have the right to change their tax policy, but the introduced laws have to be compliant with current EU regulations.

Polish politicians came up with the idea for the new tax in the general elections campaign. Their intention was to curb the expansion of big foreign supermarket chains and make it easier for small shop owners to compete with them. However, the EU stresses the need for fair competition and equal treatment of all market participants.

Before the new tax was passed through the Parliament, the ruling party assured the regulations are compliant with EU laws. EU officials appear to hold a different view. An inquiry was launched in order to examine the new Polish regulations.

An attempt at introducing a “supermarket tax” was already made in the past by Hungary. After the protest of the EU officials, Budapest had to back out.

Suspension of the tax is a big hit to the government. Not only does this show Polish ministry officials as incompetent, but above all cuts down the expected state revenue. The retail tax was expected to bring 1.6 billion PLN in 2017. The government plans some heavy spending next year, and money has to be found somewhere.

Polish Ministry of Finance revealed it is going to prepare a new version of the questioned regulations that will most likely come into force on 1 January 2017. Budget for 2017 will be amended as well. Minister Paweł Szałamacha noted that if the Commission takes a negative standpoint on the issue, Poland will contest it.