Poland says plans two rates in its new retailer levy

Poland plans to impose a progressive, two-rate tax on retailers, with a tax-free amount of 17 million zlotys ($4.3 million) in monthly revenue, despite possible opposition from the European Union (EU), the finance ministry said in its latest draft.

The new levy, aimed at boosting the state budget, is one of key election promises by the now ruling conservatives from the Law and Justice (PiS) party.

The Monday draft, pending government approval before going to parliament, comes after months of talks with retailers and after earlier plans drew heavy criticism from the industry and the European Commission.

The ministry now plans to impose a 0.8 percent tax on monthly sales between 17 and 170 million zlotys, and a 1.4-percent rate beyond 170 million, favouring smaller retailers.

According to earlier statements, the levy, set to hit retail chains by Jeronimo Martins, Tesco, Auchan or Carrefour, will be launched in July and bring in 1 billion zlotys to state budget this year.

Along with the tax on bank assets imposed earlier this year, the tax echoes levies implemented by the Hungarian right-wing government since 2010, which helped cut Hungary's budget deficit to about 2 percent of economic output last year.

But Hungary had to soften its taxes, including a cut on inspection fees on major food retail chains after the European Commission said it unfairly favoured firms with lower turnover.

Budapest has said it was watching Brussels' reaction to the Polish retail tax.

The Polish ministry said sales of coal, gas and medicine, as well as sales on the internet are to be excluded from the levy. ($1 = 3.9642 zlotys)