Poland: Windfall tax timeline

Question:

Do you have a list of increases windfall taxes that the Polish government has announced in the past year?

Answer:

Not that many details have actually been released, though there has of course been a lot of ink spilled on the issue. The rough timeline is as follows:

- On Jul 4, PiS leader Jaroslaw Kaczynski floats idea of windfall tax on banks, mostly due to fact deposit rates weren't rising to match the increase in official interest rates. Banks did respond to this by raising deposit rates. [Our story?here .]

- On Jul 11, PM Mateusz Morawiecki threatened to hit state-held companies with a windfall tax, noting natural gas and power companies had to share their profits with Poles, who were being hammered by high prices. [Our story?here .]

- But July and August saw no decisions, with the government taking the summer to work on ideas. One thing to note is that this issue has a political dimension in that Morawiecki's new big rival, Deputy PM and State Asset Minister Jacek Sasin (a PiS stalwart), has taken a lot of responsibility for an area that might at one point be the PM's to direct. Both have been fighting over this and over energy policy in general.

- On Sep 25, it was reported that Sasin told state TV the windfall tax being worked on would mean a 50% tax on utility companies' windfall profits and would raise PLN 13.5bn to help offset the cost of programs to reduce power prices. No details were released. [Our story?here .]

- On Sep 26, the daily Rzeczpospolita reported details, such as the tax would be levied on all companies employing over 250 people or with revenue over EUR 50mn. The obligation to pay the tax was to be imposed on companies whose gross profit margin for 2022 was greater than their average gross profit margin for 2018, 2019, and 2021. 2020 was not to be included due to the pandemic. The tax will be levied at 50% of the profit deemed excessive. Bank profits were to be treated differently. Here, the margin was to be determined using the ROA. For example, a bank that generated a net profit of PLN 2bn in 2022, with assets of PLN 105bn would have an ROA ratio of 1.9%. If the related indicator was 1.0% in the reference period, the basis for calculating the levy would be PLN 105bn times 0.9%, which would give PLN 945mn. Taxing 50% of that would produce PLN 473mn. [Our story?here .]

- That idea generated immediate criticism. The Polish Bank Association (ZBP) criticised it for hitting already burdened banks. Rzeczpospolita had a front-page editorial calling it immoral. Many companies were up in arms, especially since not all large companies have benefitted from the situation and rather have been hard hit by rising costs, particularly as power and natural gas tariffs are not regulated. [Our?story ?on ZBP criticism.]

- The government then backtracked, saying the windfall tax was still being worked on.

- On Oct 12, the radio broadcaster RMF FM reported that the 'Sasin tax,' as it became known in Poland, was scrapped. [Our story?here .]

- On Oct 13, government spokesperson Piotr Mueller said the tax was not dead, but was being worked on and would be targeted in the future. PM Morawiecki confirmed later that day, the tax was not necessarily dead. [Our story?here .]

In the end, the government has drafted plans to use power companies' income to subsidise power price caps for households, SMEs, local governments, and public institutions. Climate Minister Anna Moskwa suggested at a presser on Oct 14 that this idea had replaced the windfall tax, at least for power companies. I think that is probably right. Banks are probably not going to be targeted further, especially as the Polish Financial Supervision Authority (KNF) warned last week of financial system stability if a Court of Justice of the EU (CJEU) ruling expected next year doesn't allow banks to charge CHF borrowers for the use of capital for housing loans ruled invalid. Large companies are hunkering down, though it is possible something could change. Most big companies are foreign-owned and PiS has little trouble hitting them.