Russell Bedford Poland CEO Andrzej Dmowski features on TVN24 “Business for People”

March 2019

Dr. Andrzej Dmowski, a lawyer and tax adviser for Russell Bedford Poland, featured as a guest speaker alongside editor Paweł Blajer on one of Poland’s largest TV stations TVN24. The introduction of new VAT rates in Poland was the subject of this edition of "Business for People" on TVN 24. Here’s what they discussed:

Paweł Blajer: Mr. Dmowski, what is the unification of tax rates for?

Andrzej Dmowski: Mr. Blajer, let us remember that, as a general rule, we have a basic rate of 23%, but for some goods and services, both our Community legislator and Polish regulations indicate that there may be so-called reduced rates, i.e. 8% or 5%, do not count towards this rate, for intra-Community supplies. This is actually a preference for a consumer who does not have the right to deduct this tax. He bears the economic burden of this tax. The regulations specify what can be applied to such a reduced rate, and when it is 23%.

Paweł Blajer: I understand that as we have had such a large, sometimes illogical differentiation of rates in our history, there was a need to unify that rate, e.g., for all pastry products and bread we have a rate of 5%. The famous donuts that we eat on Fat Thursday, were taxed in various ways with all possible rates, even 0 when it came to the export of donuts.

Andrzej Dmowski: Yes, the level of the drama reached its zenith. In a country like Poland we never produced chips, which were taxed at a rate of 23%, but we produced - note - salted biscuits. All this in order to reduce the rate. We hope that it will change. We're going in the right direction. Let us remember that the Ministry says that in principle we will level down.

Paweł Blajer: That’s right. It means that in the project, for example, all breads are equal to 5%, all spices equate to 8%, magazines and articles for children up to 8%. However, in the case of one product group, it is still not good - beverages that have a low content of extract associated with a specific type of ingredient that is important for this drink. It will still be the highest rate - 23%.

Andrzej Dmowski: We can ask consumers whether they really know what they buy in the store. There are so-called 100% juice, of course it is a marketing gimmick, there is no 100% juice in juice, or we have juices with a content below 20% of the juice value in the juice. And here our legislator has taken over juices in which the content is above 20%, the highest rate. It was supposed to be merged with the so-called other drinks, read coffee, tea, water, which also applies to ice. For producers of juices and juice-like drinks, this is a significant increase in the rate.

Paweł Blajer: How do you assess that?

Andrzej Dmowski: Formally, this is a unification, but in this case it is a unification upwards, so - just as the Ministry said - we basically equate it down, but in some cases situations may arise that this rate will actually increase. The problem is that Poland is a large producer of juices and products, which we call beverages, where the real burden of value-added tax will be significantly higher.

Paweł Blajer: Let's move on to the next group of products that are associated with luxury food. These are: crabs, snails, caviar, oysters, mussels and octopus. This is not a kind of unprocessed food, but nevertheless our legislator does not like it very much. He charges it by the highest tax rate.

Andrzej Dmowski: The Statute indicates that selectively selected product groups can be subject to this higher tax rate. Here we identify octopuses as luxury goods. The legislator does not like luxury goods.

Paweł Blajer: So we have a political aspect in the background. Thank you for the conversation. My guest was Dr. Andrzej Dmowski, lawyer, tax adviser to Russell Bedford Poland.