Commission Report (2002): Poland

• Progress since the last Regular Report
• Overall assessment
• Conclusion

Chapter 10: Taxation

Progress since the last Regular Report

Since the last Regular Report, Poland has continued to make steady progress in developing its institutional capacity in the area of taxation and in aligning its legislation.

In the area of indirect taxation there have been a number of legislative changes. On VAT, Poland has made good progress in further aligning its rates with the levels required by the acquis. Marine transport means and marine fisheries means have become zero rated and the definition of specialist journals benefiting from zero rating has been refined. The principles for refund of input VAT to importers and the conditions and methods for refunding VAT in certain specific situations were established. VAT exemption was introduced as regards certain imports, and, import charges and other compulsory duties collected by the customs authorities in connection with imports have been included in the taxable amount for the calculation of VAT.

Concerning excise, duties have been increased on motor fuels and LPG used for motor vehicles, as well as on cigarettes. Energy from renewable sources and pumped storage plants are now exempt from excise duty.

With regard to direct taxation, a new 20-per-cent tax on income from savings (interest from bank deposits, dividends from bonds, etc.) was introduced in March 2002. In January 2002 Poland introduced a 2% tax on all outward capital movements, which applies to residents only and will cease at the end of December 2003.

In the reporting period the Polish tax authorities intensified their efforts to improve the effectiveness of the Polish tax administration. In August 2002, the Council of Ministers adopted the `Tax Administration Modernisation Strategy by 2004' with the aim of ensuring a sufficient level of operating ability to apply and enforce the acquis.

Efforts during the reporting period have focused in particular on training, improving tax enforcement and computerisation. A system of training by internal trainers (who are tax officials themselves) was conducted for the first time in the domain of VAT and direct taxation, and involved training of 760 tax officials. Furthermore, the status of the Training Consulting Council was modified, giving it power to assume a real role in guiding training through the whole tax administration.

Following the integration of the customs services into the Ministry of Finance (see Chapter 25 ­ Customs Union), the excise and customs administration merged in the second quarter of 2002.

Further improvements were observed in tax enforcement and in computerisation of tax administration. An amendment to the Law on Bailiffs and Enforcement of September 2001 allowed for enforcement procedures to be simplified and for the efficiency of enforcement to be improved. A newly operational information technology tax enforcement module facilitates the gathering and processing of information about taxpayers, their bank accounts and links with other taxpayers. The construction of the Wide Area Network connecting the Ministry with tax chambers and offices has recently been completed, and the network is now fully operational. In the Ministry of Finance a Unit has been set up to co-ordinate the organisational preparation of the Central Liason Office.

Overall assessment

With regard to VAT Poland has brought its legislation more closely in line with the acquis. Some further adjustment of rates, in particular zero-rating and the scope of exempt transactions remain necessary. In addition, action should be taken immediately to abolish all discriminatory VAT imposed on domestic and imported products. Further alignment is also necessary to extend the definition of the scope of taxable transactions to assignment of copyright and other intangible property, to introduce the special schemes for taxation of travel agents and second-hand goods and the provisions for intra-community transactions. In addition, the special scheme for farmers should be completed.

With regard to excise duties, the main challenge Poland has to face is the implementation of the duty suspension system. Poland has so far lacked any equivalent to the suspension system stipulated by the acquis. This should receive due attention. Moreover further efforts are required to ensure that duty rate levels are risen to the minimum levels set out in the acquis.

Concerning direct taxation Poland will have to align its legislation further with that of the acquis. Legislation will have to be reviewed in order to eliminate potentially harmful tax measures, so as to comply with the Code of Conduct for Business Taxation to the same extent as current Member States upon accession. The Commission's initial technical assessment of potentially harmful measures applied in Poland is ongoing.

Regarding administrative capacity, Poland appears to be well aware of what needs to be accomplished and progress is in principle proceeding in a positive manner, although a significant number of actions still need to be implemented. The main difficulty relates to tax collection, which remains deficient. The effects of the recent organisational changes which transferred the excise administration to the customs administration (which itself has gone through an important reform lately) remains to be seen, and particular care should be taken to ensure the minimum of disruption during the time it takes for the new structure to settle down so as to ensure the proper and effective functioning of the administration upon accession.

In the field of information technology, significant steps have been taken to achieve the key indicators for interoperability with the VAT Information Exchange System. However, the centralisation of data remains the major information technology challenge. More generally, significant efforts are required at regional and local levels.

Conclusion

In its 1997 Opinion, the Commission concluded that there should be no significant difficulties with regard to the acquis for direct taxation and that in so far as indirect taxation was concerned, Poland would be able to comply with the acquis in the medium term provided significant efforts were made. Finally it noted that it should be possible to start participating in mutual assistance once the tax administration developed its expertise in this respect.

Since the Opinion, significant efforts have been made and Poland has made real progress in this field, most noticeably with respect to legislative alignment (although the Code of Conduct for Business Taxation remains an essential issue requiring attention), but also, to varying degrees, with respect to its administrative capacity. As a result Poland, has achieved a reasonable level of alignment with the acquis and moderate development of the necessary implementing capacity.

Negotiations on this chapter have been provisionally closed. Poland has been granted transitional periods until 31 December 2007 for the continued application of the reduced VAT rate on the supply of restaurant services and the VAT zero-rate on the supply of books and specialist periodicals. Poland has been granted, for an indefinite period of time, the right to apply a VAT registration and exemption threshold of EUR 10 000 for small and medium-sized enterprises. Poland has been granted a transitional period until 31 December 2008 to gradually reach the Community minimum excise duty levels on cigarettes. Poland was granted a one-year technical transitional period for the application of a reduced excise duty rate on ecological fuels (petrol manufactured with anhydrous alcohol, gas oil with a low sulphur content and petrol containing ethyl butyl alcohol). Poland is generally meeting the commitments it has made in the accession negotiations.

In order to complete preparations for membership, Poland's efforts now need to focus on finalising its legislative alignment, in particular on VAT (except for those areas where transition arrangements have been agreed), duty rates and intra-community transactions, and making the necessary efforts to finalise the establishment of the necessary administrative capacity (information technology in particular) for VAT and even more so for excise duties.

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