EU’s Executive Starts Probe Into Poland’s New Retail Levy

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The European Commission opened a probe into Poland’s new tax on retailers that imposes smaller charges on shops with lower sales. A ruling-party lawmaker said that parliament may be prepared to change the legislation, according to PAP news agency.

The levy, which entered into force on Sept. 1, may breach state-aid rules because the progressive tax “has the effect that companies with low turnover either pay no retail tax or pay substantially lower average rates than companies with high turnover,” the EU’s executive said in a statement on Monday. In January, the Commission started a separate investigation against Poland amid concerns the new government wasn’t adhering to the bloc’s democratic standards.

The retail levy was advocated by the new government as a tool to increase competitiveness of smaller and family-run retailers that lose market share to foreign-backed rivals, such as Portugal’s Jeronimo Martins SGPS SA’s Biedronka stores, Tesco Plc and Germany’s Schwarz Beteiligungs-GmbH’s Lidl shops. The finance ministry, which forecast the tax to add 473 million zloty ($128 million) in budget revenue this year and 1.6 billion zloty next year, said it will respond to the EU’s investigation on Tuesday.

“We may need to quit the progressive rate and introduce a single rate,” PAP cited Law & Justice lawmaker Adam Abramowicz as saying. Poland will need to see the reasoning behind the EU’s decision before taking any steps, he said.

Polish consumer-goods distributor Emperia Holding SA, which is one of companies most exposed to the progressive tax, rose 1.2 percent following the news, the highest close since March 1. Shoe retailer CCC SA gained 2 percent.

— With assistance by Marek Strzelecki, and Konrad Krasuski

(Adds comments from Polish lawmaker from first paragraph.)
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