POLAND At the end of January the Ministry of Finance piublished the first official draft of the new act on the retail tax, which was amongst the promises made by the now ruling Law and Justice party during the general election campaign last year. Retailers, however, have been hostile towards the proposed changes, both in their original and the amended form announced at the beginning of February. A third version of the bill is now to be announced. To smooth the passage of the legislation, consultations are being held with the European Commission. The manner in which the new duty is imposed on retailers will significantly impact their revenues.
More amendments to come
According to the first proposition of the new regulations, a 0.7 pct revenue tax would be imposed on retailers whose monthly turnover does not exceed PLN 300 mln and a 1.3 pct duty on those generating larger revenues. Additionally, on weekends and public holidays the rates would go up to 1.3 pct and 1.9 pct for each revenue category respectively. Retailers with revenues of less than PLN 1.5 mln a month would be exempt from the levy. The Ministry also wanted to start charging the revenue tax online, even for those retailers who ship products in from abroad. This bill was badly received by the retail industry, as the majority of retail trade organisations and associations opposed the new regulations. These included the Polish Chamber of Commerce, the Polish Organisation of Trade and Distribution, the Polish Council of Shopping Centres and the Polish Trade Forum, as well as representatives of Polish retail chains. The most criticised aspects of the new law included the weekend and public holiday tax rates, as well as the method of calculating the tax. As the critics pointed out, similarly-constructed, progressive retail levy systems have been queried by EU authorities in the past. As a result, after initial consultations the Ministry of Finance has decided to make some changes to the proposed provisions of the new act.
Out of the frying pan into the fire
Retailers have now familiarised themselves with the amended draft of February 3rd, 2016. The new proposal not only did not improve their mood but also triggered protests by franchisees, as it defines a franchise business merely as a chain of entities with a common trademark. In practice this description would force each entity operating in the franchise network to pay retail tax separately. Thus a number of Polish chains have reacted sharply. Drogerie Jasmin, Drogerie Polskie, Espiro Group and Jawa Drogerie sent an open letter to Prime Minister Beata Szydło; Vistula Group, Media Expert/Terg, Kan, Lancerto, Solar, CCC, PBH Quiosque, PSB Polskie Składy Budowlane, Yes, Ziaja, Taranko, Kolporter, Marketing Investment Group, Wojas Trade, Martes Sport, OTCF, Kazar Footwear and Gino Rossi/Simple Creative Products have written a joint open letter together with the Polish Council of Shopping Centres to the Polish government. Polska Sieć Handlowa Lewiatan’s owners went a step further and held a protest in front of the parliament building. Other changes included in the most recent version of the bill, for instance the introduction of a lower tax rate of 1.3 pct for monthly revenue of up to PLN 300 mln on Saturday, Sunday and public holiday trading have been characterised as “cosmetic” by the industry.
Three times lucky
Now the retail tax bill draft is to be amended again. The Polish government will aim to amend the controversial definition of a franchise chain by extending the “chain of enterprises operating under the same trademark” description by a common equity interest share. The provisions on imposing the retail tax on online shops are also reportedly to be erased. Still, the future retail tax calculating system remains a mystery.
“The European Commission has expressed interest in the new proposal for a progressive retail tax and sent us a request to submit clarifications on the matter. I cannot guarantee that we will not have to dispense with the progressive retail tax concept and use a flat tax rate instead. In such a case, the structure of the retail tax system would be different, with a much higher tax exemption revenue threshold [PLN 18 mln per year – editor’s note],” Henryk Kowalczyk, the head of the Standing Committee of the Council of Ministers, said in a recent interview with the Trójka radio station’s Beata Michniewicz. Such a solution would certainly please the retailers as they have repeatedly submitted similar proposals. “However, provided that the government agrees to introduce such a retail tax, we believe that the levy should be of a general character, with flat rates not higher than 0.4 pct of a company’s revenue,” Renata Juszkiewicz, the president of the board of the Polish Trade and Distribution Organisation, wrote in its open letter to Beata Szydło. Only time will tell what the ultimate effects and repercussions of the tussle over the retail tax will be.
