The Court of Justice of the European Union (CJEU) dismissed the European Commission’s appeal on the introduction of the “supermarket tax” in Poland, ending a four-year-long legal battle. The legislation concerning the retail sales tax was passed by Polish Parliament in summer 2016, and it was meant to be introduced on Sept. 1 of that year, but due to appeals from supermarket companies in Poland, it was blocked by the European Commission.
The Commission claimed that the tax constitutes state aid and infringed EU law and issued an appeal to the CJEU. In May 2019, the CJEU rejected the European Commission’s claim and this Tuesday, it upheld that ruling.
The legal process in both instances of the CJEU took over four years. Although the ruling was deemed a success for the Polish government, the income from the tax during the period, estimated to be at least €2.1 million, will not be refunded by the Euroepan Commission.
As a reminder, the government decided that the tax would affect retailers with a monthly revenue exceeding €3.7 million. It would have two rates: the lower rate (0.8 percent) would be applied to monthly revenue between €3.7 million and €37 million, and the higher tax rate would be applied to revenue exceeding €37 million per month.
It is important to note that the revenue in question which is being taxed is only retail sales.
Moreover, in addition to bringing in new tax income to the state budget, the tax is also meant to equalize opportunities between massive supermarket chains and smaller trade companies. It is also meant to support Polish food producers who sell their products mainly in local shops owned by small- and medium-sized companies.
The tax is meant to efficiently tax supermarket chains who are currently avoiding full taxation by transferring some of their income abroad. As a result, it is designed to halt the expansion of huge foreign supermarket chains.
Just in 2008, small shops comprised 51 percent of all Polish sales outlets. By 2019, small shops comprised only 30 percent of all stores and are becoming increasingly fewer in number.
While the Council of Ministers has already added €325 million to the 2021 state budget from the tax, experts believe that the income from the tax will be much higher.
According to media reports, the income from the retail sales tax for January 2021 will vastly exceed €21 million.
The revenue of supermarket chains which will be affected by this tax reached €26 billion in 2019. Those companies paid no more than €220 million in corporate tax, less than 1 percent of their revenue.