EuroCommerce, the body which represents the retail and wholesale trades in Europe, has filed two complaints to the European Commission against a new tax imposed on retailers by the Slovak government.
The tax, which applies only to foreign-owned companies in the country, requires retailers to pay 2.5% of their net turnover to authorities. The government expects to raise €87 million from the tax, which came into force on 1 January 2019.
EuroCommerce director-general, Christian Verschueren, commented, “This law is part of a wider and growing trend of protectionism and populist policies against retailers, especially in Central and Eastern Europe.
"This is all aimed at protecting local competitors and driving out foreign companies. These countries benefit greatly from the single market, yet want to disapply it when it suits them politically.”
Incompatibility With EU Laws
According to EuroCommerce, the tax is incompatible with EU laws on two counts.
Firstly, by exempting virtually all Slovak-owned retail chains, the tax constitutes unlawful state aid, similar to retail taxes previously proposed in Poland and Hungary, and subsequently found illegal by the Commission.
Secondly, the discriminatory nature of the tax infringes the clear treaty principle of freedom of establishment.
Targeting Foreign Players
The political debate preceding the new tax law makes it very clear that politicians are specifically trying to target foreign players, EuroCommerce said.
“International retail companies have invested billions of euros in offering Slovak consumers modern, competitive supermarkets with a wide range of quality products," Verschueren explained.
"Despite this, Slovak legislators consciously chose to focus on foreign-owned retailers, and to exempt virtually all Slovak competitors, with the clear objective of deterring foreign investors. This deliberate move will unavoidably mean less choice and higher prices for Slovak consumers.”
EuroCommerce has asked the Commission to act quickly in order to limit the damage to consumers and businesses, and to open an in-depth investigation.
It has also requested to suspend the application of the law under EU state aid rules.
Verschueren added, “Retail is a low margin business. Grocery retailers’ margins are typically less than 3%. A 2.5% tax on turnover, therefore, wipes out their profits, and forces them into making a loss.
"This will inevitably have significant consequences for future investment in the country.”
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Dayeeta Das. Click subscribe to sign up to ESM: European Supermarket Magazine.