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POLAND: EC appeals retail tax to CJEU

In September 2016 the ruling PiS party introduced a retail tax reform. In October 2016, the European Commission struck down the new retail tax, arguing that it discriminates against larger stores and constitutes state aid. The tax blocked by the EC was be based on revenue, with no tax due on the first 17 million PLN of monthly sales. Monthly revenues from 17 to 170 million PLN were subject to a 0,8% tax, with anything above taxed at 1,4%. The levy was expected to bring in an additional 1,9 billion PLN in 2017 alone and was one of PiS’ main strategies of financing the government’s spending plans. The tax did, after all, aim to both raise government revenues and level the playing field between largely foreign-owned retail giants and smaller local stores.

Yesterday, the European Commission has appealed the decision of the Court. Poland will now have to wait another year or so for the second ruling. This comes after the May ruling of the European Court of Justice, which overturned the European Commission’s decision to block the levy. The Court argued that the threshold of the tax itself cannot be considered as selective and a lack of a levy on SMEs is not state aid.

The May ruling of the CJEU has caused some concern for large stores in Poland. The PiS party hoped that it would be able to secure additional funds for the state budget. However, more importantly, the ruling of the CJEU sparked hope of a win with the European Commission – a boost for the PiS party’s EU narrative. Though the European Parliament elections gave hope that the previously ongoing feud with the European Commission will come to an end, it is becoming increasingly apparent that the outgoing Commission wants to take full benefit of its remaining time in office and will not cease fire. It is not certain, however, if the levy will come back.