Poland Plans Battle Against Tax Avoidance to Boost Budget Income
Polish tax authorities plan to increase inspections on companies suspected of artificially increasing their operation costs and sending taxable profits across the borders to stop a trend of falling corporate tax revenue.
Audits will start in the second quarter, the Finance Ministry said on its website on Friday, adding that companies have until then to “correct” past tax returns to reduce potential penalties. Poland is seeking gain an additional 15 billion zloty ($3.8 billion) next year from better tax collection, deputy Finance Minister Konrad Raczkowski told Puls Biznesu daily on Feb. 4.
Inspectors will focus on “companies that in past years didn’t pay any corporate tax, even though their revenue grew rapidly,” the ministry said in its statement. “This indicates a company structure aimed at lowering the tax base in the Republic of Poland to zero.” Authorities will especially scrutinize payments for the use of parent companies’ trademarks and advisory services, as well as transfers by units within a single holding company.
The government is seeking ways to plug a gap in tax revenue, estimated by Deputy Prime Minister Mateusz Morawiecki at as much as 80 billion zloty, as the cabinet prepares to fund new social spending programs. While the International Monetary Fund noted in a report last May that the deterioration in tax collection was a major issue for the country, some economists doubt if new revenue can be found quickly.
“The government is over-optimistic about the potential scale of additional income,” said Jaroslaw Janecki, chief economist at Societe Generale SA in Warsaw. “Poland has a long history of unsuccessful attempts to curb tax avoidance, so adding optimistic additional revenue to the state budget plan only increases fiscal risks.”
Poland’s budget income from corporate income tax amounted to 25.7 billion zloty last year, according to the Finance Ministry, compared with 27.2 billion zloty in 2008. At the same time, Poland’s gross domestic product expanded by more than 24 percent, the fastest growth rate in the 28-nation European Union.
