The Court of Justice of the European Union ruled that the European Commission’s decision to ban the introduction of the retail sales tax in Poland was wrong. This means that it is more likely that the tax, which is currently being postponed from one year to the next, will be effective from 1 January 2020. Is this certain? Not yet, because there is still time for an appeal against the judgment. The European Commission has two months to take such steps, but the appeal may concern the formal aspects of the judgment, and not its content. Tax issues most often go to the second instance, which may take months. In addition, the final outcome is not yet determined.
What is a tax?
The introduction of the tax will have a negative impact on the level of profits made by retailers. According to the current draft, which was adopted by the Sejm in July 2016, the tax on retail sales revenue will amount to 0.8% on monthly turnover between PLN 17 and 170 million and 1.4% on monthly turnover above PLN 170 million. Thus, it will hit the largest retail chains first of all, while it will almost never affect franchise chains associating small shops (no definition of franchise in the Act and a tax-free amount of PLN 17 million per month). Moreover, Internet sales will not be taxed.
What amounts are involved?
If such a tax comes into force, the largest companies will be significantly affected by it. For example, our preliminary estimates (based on the entry into force of the tax at the beginning of 2020) show that Jeronimo Martins will pay about PLN 810 million in 2020, Auchan 150 million PLN, Dino 110 million PLN, LPP 68 million PLN, CCC 31 million PLN, or Euro-net (the owner of the Euro-AGD RTV network) over 90 million PLN. It is worth noting that this tax will be paid by all large companies regardless of their nationality. A quick estimation shows that it is highly probable that the amount exceeding PLN 2 billion will be reached.
Who will ultimately pay?
It is worth noting that although it is mentioned that the tax will not be transferred to consumers, similarly as it was the case with the bank tax, it is unavoidable. This applies especially to companies in the food segment, where margins are relatively low. Certainly, the biggest companies will have an impact on suppliers, so that if they do not decrease, they will at least hold off on price increases. Partly at least in the short term, the trading companies themselves will certainly lose part of their net profits. Ultimately, it can be seen that although at the beginning the tax will be paid by all parties to the trade, in the long run it will be felt most by the end customer.