2021: Retail tax and sugar tax come into force
Wpis dostępny jest także w języku: polski
From January 2021, a retail tax and a sugar tax will come into force in Poland. Their implementation has been repeatedly postponed, most recently because of the coronavirus pandemic.
Sugar tax on “monkeys” and sweet drinks
Under the Act amending certain laws in connection with the promotion of pro-healthy consumer choices of February 2020, an additional tax will be imposed on alcoholic beverages up to 300 ml (so-called monkeys) and on beverages with sweetening or active substances added. The fees will be charged to traders who place products on the market. This concerns the sale of beverages to the first point of retail sale or the retail sale of beverages by the producer or entity purchasing such products as an intra-community delivery/importer. However, there is no doubt that these charges will be passed on to the consumer to a significant extent and will result in higher prices for these beverages.
The tax will be PLN 0,5 in the case of a sugar content of a drink equal to or less than 5 g in 100 ml of the drink, or in the case of a sweetener content of one or more sweeteners in any quantity, as referred to in Regulation No 1333/2008 (Union food additive regulation). For each gram of sugar above 5 g/100 ml an additional PLN 0,05 shall be charged. Beverages containing added caffeine or taurine will be subject to an additional charge of PLN 0,1 per litre of beverage. In total, the maximum amount of the charge will be PLN 1.2 per litre of beverage.
The new regulations also impose a fee on entrepreneurs selling alcoholic beverages not exceeding 300 ml (so-called monkeys). It is to be PLN 25 per each litre of 100% alcohol sold in packages of up to 300 ml. According to Arena Advisory, for example, this means PLN 1 for 100 ml of 40% vodka or PLN 2 for 200 ml of 40% “monkey” vodka.
NFZ main beneficiary of sugar tax
The main objective of introducing the tax, as argued by the Ministry of Health, is to promote healthy dietary choices and to improve the quality of the diet by reducing the amount of food not recommended for excessive consumption. The experience of other EU countries shows that such measures reduce consumption and thus contribute to reducing overweight and obesity in society. Additional taxes on sweetened drinks or fast food have been introduced by Denmark, Hungary, Portugal, France and the United Kingdom, among others.
Therefore, the lion’s share of revenue from the additional tax will go to the National Health Fund (NFZ). According to the Act, in the case of the tax on alcoholic beverages, this will be 50% of the collected funds (the remainder will be municipal income). As far as the additional fees on sweetened beverages are concerned, 96.5% of the collected fees will be transferred to the NFZ. In 2020, the total revenue from the sugar tax was estimated at PLN 2.3bn (assuming that it was to enter into force from April). Of this, PLN 2.1bn was to go to the National Health Fund.
The retail tax is not in breach of EU rules
Sugar tax is not the only new tax to be introduced from January 2021. All the indications are that the retail tax will also come back at the beginning of next year. Poland adopted it as early as 2016, but a few months after it came into force, the European Commission considered it to be illegal state aid. The General Court of the European Union approved of the Polish side in May 2019, but the judgment was appealed to the Court of Justice of the European Union (CJEU) by the Commission. In October 2020, the Advocate General of the Court of Justice of the European Union decided, however, that the tax does not infringe EU law on state aid.
Although the judgment of the CJEU has not yet been delivered, all indications are that it will be in line with the Advocate General’s opinion. Poland expects a positive judgment for itself in the first months of 2021. Therefore, it restores tax collection from January 2021. This is another implementation. Initially, it was to return from January 2020 (which was halted in connection with ongoing proceedings in the EU), and then from July 2020 (suspension in connection with COVID-19).
Grocery retailers will pass the charges on to customers and suppliers?
The retail tax applies to large-format shops. This is due to the fact that the surplus of revenues from retail sales in a given month over the amount of PLN 17m subject to taxation. If the base does not exceed PLN 170m, it is 0.8% of the tax. If it exceeds, the tax will amount to 1.4% of the surplus of the tax base over PLN 170m.
Similarly to the sugar tax, also the tax on retail sales may be transferred to consumers. The chains may increase prices in shops or force suppliers to make reductions, as most market players will do the same.
About the author
Retail Business Unit Director
Analyst with over twelve years of experience. She heads the Retail department at PMR. Areas of specialisation: grocery retail, DIY and home furnishing markets.