Polish supermarkets want turnover tax to hit foreign competition

Polish supermarket chains say the government's proposed turnover tax needs major changes if it is to act as a weapon against foreign competitors dominating the Polish market.

The eurosceptic Law and Justice (PiS) party that won last month's general election has not explicitly said that the new tax is meant to handicap Britain's Tesco, France's Carrefour and Auchan or Germany's Kaufland and Metro, and other foreign players.

But many see this as a goal of the planned two-percent revenue tax on stores spanning more than 250 square metres (2,690 square feet), which the PiS estimates will bring in 820 million euros ($870 million).

The party has said the tax revenue will fund generous family benefits and a lower retirement age -- campaign promises that helped it defeat the liberal Civic Platform (PO) party at the ballot box.

But many of the Polish market players are not happy with the new tax, and have joined forces to say that the tax in its current form will not help them, and may actually make their situation more difficult in the Central European powerhouse of 38 million people.

Around a dozen homegrown companies, led by such grocery store chains as Polomarket and Piotr i Pawel, set up the Polish Trade Forum to call for changes to the proposed tax.

"Our profitability is around two percent. That drops to zero with a two-percent tax," a forum organiser, Robert Krzak, told reporters.

Large, foreign-owned "chains will hold up better. They'll put pressure on their suppliers to lower their prices, while smaller businesses will have a hard time coping."

- Discrimination? -

The forum plans to ask Prime Minister Beata Szydlo and her government to make the tax progressive so that the smallest players would not pay a cent while the largest would get the highest tax rate.

"So yes, it would mostly hit the foreigners," Krzak said without hesitating, while adding that he is a supporter of free enterprise and the free market.

Nine of the 10 leading retail chains in Poland are foreign-owned, with the top spot going to Portuguese food distributor Jeronimo Martins, which owns the Biedronka brand totalling 2,600 stores and a turnover of more than 8.4 billion euros last year.

The forum has suggested that the government abandon the store surface area criterium and is also calling for a new tax on e-commerce, which is also marked by a strong foreign presence with companies like South Africa's Allegro and Germany's Orlando.

But the progressive nature of the forum's desired tax would "have a discriminatory effect" according to the Polish Trade and Distribution Organisation (POHiD), which counts most of the foreign chains among its members.

That kind of tax would be incompatible with EU legislation and Polish competition law, said POHiD head Andrzej Falinski.

He told AFP "that franchise chains will be the hardest hit, because major foreign groups will invest in small surface area stores, making for competition that will be hard to bear."

"The big players will also invest in low prices, which the small guys won't be able to do."

Foreign-owned chains accounted for 53 percent of all supermarket sales in the country last year, with total turnover of around 52 billion euros, according to Poland's central statistical office.