Polish retail tax State aid case paves the way for digital services taxes

Poland introduced a progressive tax based on turnover in 2016.  Small shops with low monthly turnover paid no tax, whereas large supermarkets (mainly owned by foreign companies) paid a top rate of as much as 1.4% of their turnover. The Commission found that this constituted unlawful State aid, taking the view that the tax on the retail sector constituted a selective measure favouring certain undertakings on account of the progressive nature of the rates applied to the turnover constituting the basis of assessment.  

On 16 May, the General Court annulled the Commission’s decision concluding that the Commission was not entitled to infer solely from the progressive nature of the new tax on the retail sector that that tax entailed selective advantages. 

An article by Bloomberg highlights the significance of this case for the digital services taxes currently being considered by EU countries (including the UK and France) which will apply to digital revenue, or turnover, generated by tech giants, such as Apple and Amazon. One objection raised by critics has been that countries’ individual attempts to tax digital companies would likely face illegal state aid challenges because revenue thresholds would exclude and favour smaller local firms, and hit the larger foreign competitors.

The General Court's decision may yet be appealed to the Court of Justice so Poland does not plan to reintroduce the tax this year.

For more detail see the Press Release of 16 May (the judgment is not currently available in English).