Sunday

24th Sep 2017

Commission targets Poland's supermarket tax

  • Smaller Polish retailers support the tax, as it hits big businesses much harder. (Photo: msz.pl)

The European Commission has announced an in-depth investigation into a Polish tax on the retail sector, in a move that could complicate Poland’s government's domestic plans.

The EU executive is concerned that the system, which was introduced on 1 September, amounts to state aid to small retailers because it taxes big businesses more heavily.

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Poland was told to suspend the levy until the commission has concluded its probe, launched on Monday (19 September).

European Parliament vice president Ryszard Czarnecki, from Poland’s ruling Law and Justice (PiS) party, denounced the probe as ”wholly political”, and said the commission was acting in the interests of Western supermarkets in Poland.

The European Commission dismissed such claims.

"The Commission has looked at the issue of progressive retail taxes before, in fact we already took a decision on a Hungarian case in July," said commission spokesman Ricardo Cardoso.

The Hungarian authorities eventually backed down and binned their tax plans.

How to finance baby subsidy

The infringement procedure makes the government’s life more difficult.

PiS is riding high in opinion polls, partly because they have promised to give generous benefits to any family with more than one child - 500 zloty (€116) for the second and every subsequent child every month.

The programme is so popular with parents that even the market liberal Modern party recently said it would support it for poorer parents. The only problem is how to finance it.

Poland’s finance minister Pawel Szalamacha last year set out to finance the programme through the retail tax, which was supposed to raise €348 million a year.

Other initiatives to help fund the scheme included a banking tax, which is still under EU scrutiny, and better collection of VAT - a recent commission report showed Poland failed to collect some 24 percent of VAT due in 2014.

Government spokesman Waldemar Grzegorczyk said Warsaw had prepared for weeks for the commission’s decision.

He said the government would present a new solution on the retail tax on Tuesday.

Warsaw may apply a flat tax, as Hungary did, but it would fall to a larger extent on domestic business and be less popular than the progressive one.

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The EU commission published a paper that outlined several options on how to increase tax income from internet companies' activities, but fell short of proposing legislation.

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