As Seneca reminds us, “every new beginning comes from some other beginning’s end”. In Poland this week it was the end of the new retail tax so soon after its beginning that has caused problems for Poland’s finance minister, Paweł Szałamacha, as the EU ordered the tax to be suspended and started an investigation.
Of course, if there is one thing up with which the PiS government will not put, it is being told what to do by the powers that be in Brussels and Szałamacha, wasted no time in announcing on Tuesday that a revised tax on supermarkets would be introduced in 1st January. He described the EU Commission’s order that the existing tax be suspended as a “controversial, impudent decision, but did say that Poland would suspend the tax in its current form, but gave no details as to the new tax.
He also said that the finance ministry would revise the draft budget for next year as the government would no longer be able to rely on the hitherto expected revenue from the retail tax. The government had expected the tax, which was proposed in PiS’s election manifesto last year, to raise PLN 1.6 billion in 2017. The tax was to be levied at two rates: 0.8 per cent on revenue between PLN 17 million and PLN 170 million a month; and 1.4 per cent on revenue of over PLN 170 million a month. This revenue is needed to help fund a number of PiS’s other electoral promises, not least the 500+ child benefit programme which has itself contributed to increased retail sales. According to the central statistical office, retails sales in Poland were 5.6 per cent higher in August than in August last year.
For its part, the EU Commission is concerned that the tax could favour smaller shops and so could be seen to breach EU rules on the provision of state aid saying that it “”has concerns that the progressive rates based on turnover give companies with a low turnover a selective advantage over their competitors in breach of EU state aid rules.” This interpretation the Polish government had argued against in letters sent to Brussels in July and August. Although revenue generation was clearly the main reason for the tax, some PiS politicians have argued that new rules were needed to give smaller businesses a chance to compete with the larger retail chains.
Needless to say the retail tax is not popular with the retailers and, as is the way of these things, it would be shoppers who would ultimately bear the burden of the tax. While seeing large retailers as an easy target, politicians are inclined to forget that large retailers employ Polish staff and use Polish suppliers, all of whom would also suffer from any adverse effect on retailers of the new tax. PiS also has the retail sector in its sights with curbs on Sunday trading, although, from the retailers’ perspective, this seems to be a lesser worry than a retail tax.
Be that as it may, the wider economy seems to be holding up well so far, despite the concerns on the political front. Apart from the aforementioned increase in retail sales, exports reached a record Euro 179.5 billion in 2015, despite the Russian embargo. The rate of employment in Poland grew by 0.4 per cent quarter on quarter in the second quarter of 2016 compared to an overall EU rate of on 0.3 per cent according to Eurostat, and was an improvement on the 0.4 per cent quarter on quarter decline in Poland in the first quarter of 2016.
Meanwhile, the government continues its fight to ensure the highest standards of probity in public life as the Central Anti-Corruption Bureau (CBA) investigates five companies controlled by the State Treasury for any irregularities. The companies are Lotos and Orlen, KGHM, Azoty, and Polish Armaments Group (PGZ). Apparently the CBA is investigating any possible irregularities in the expenses records in the five companies’ public relations, marketing, and consultancy budgets.
Last week, Prime Minister Beata Szydło dismissed Treasury Minister Dawid Jackiewicz following claims that he had been appointing friends and associates to top positions within state-owned companies. She also said she had spoken to the defence minister about recently suspected defence ministry spokesman Bartłomiej Misiewicz, who appears now to have been removed from the board of PGZ, despite that company’s articles of association having recently been changed to allow his appointment despite not having a university degree.
Which, if indicative of a new approach to appointments is rather encouraging, although the cynics will not doubt say it’s simply a case of the wrong sort of friends. New may be new, but its’s not always different. Or what seems to be the beginning of the end may simply be the end of the beginning.