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EU Judges Say Poland's Retail Tax Is Not State Aid

European Union judges on Thursday ruled that Poland could tax larger retailers more heavily than smaller ones, overturning a decision from state aid regulators and raising the possibility that the currently suspended tax regime could be reinstated.

The policy was one of the Law & Justice (PiS) party's main election promises when it came to power in 2015, part of a raft of measures designed to fund generous social spending pledges, which in the end it succeeded in financing without the implementation of the retail tax.

Under the scheme, retailers with monthly revenue of over 170 million zlotys (€39.6 million) were to be taxed more heavily than their smaller counterparts, but in 2017 the European Commission ruled that the measures constituted state aid, illegal under EU law.

As in many countries, small shops in Poland have come under pressure from large chains who benefit from economies of scale that allow them to offer lower prices.

Fragmented Retail Market

Poland's fragmented retail market is led by the Biedronka chain, owned by Portugal's Jeronimo Martins, which competes with Germany's Lidl, the UK's Tesco and France's Carrefour and Auchan chains.

"It is not possible to exclude tax rates from the substance of a system of taxation as the Commission did," the General Court of the European Union said in a statement.

Polish Finance Ministry spokesman Pawel Jurek said on Twitter that as the judgment was not legally binding and could be appealed against, the tax would remain suspended until the end of 2019.

"The Commission will carefully study the judgement and based on that may take any potential next steps," said a spokesman for the EU executive at its daily briefing.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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