The European Commission said on Friday that a Polish tax on the retail sector breaches EU rules on state aid. The commission said that progressive tax rates based on turnover give companies with a low turnover an advantage over their competitors.
It added: “The Commission’s in-depth investigation has shown that the progressivity of the tax rates would unduly favour certain companies over others, depending on their turnover and size.”
With such a progressive tax rate structure, smaller companies “would either pay no retail tax at all (if their turnover is below PLN 17 million) or face a lower average tax rate than larger competitors,” the commission said in a statement.
The commission said it did not question Poland’s right to decide on its taxation system.
“However, the tax system must comply with EU law, including state aid rules, and cannot unduly favour certain companies over others,” it added.
Polish President Andrzej Duda last year signed into law a bill to suspend the progressive retail tax until January 1, 2018. The move came after the EU ordered Warsaw to suspend the tax.
Poland then appealed to the European Court of Justice in Luxembourg.
Warsaw accused the European Commission, the executive arm of the European Union, of breaching EU law by ordering the progressive tax to be suspended.
The tax was proposed as part of the Law and Justice (PiS) party’s campaign ahead of its landslide win in Poland’s parliamentary elections in late 2015.
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