Polish steel producers concerned with new changes in VAT

Polish metals industry representatives have voiced concern over the changes that the Polish Ministry of Finance has proposed to apply to the main law on the VAT tax, targeting specifically the PLN 20,000 daily limit, the Polish media reported July 4.

”We are concerned with the ministry’s proposal,” Stefan Dzienniak, president of the board of the Polish Steel Association said as quoted by Polish economic daily Puls Biznesu, referring to the proposal that sets a daily transaction limit for the reverse charge mechanism at PLN 20,000. “Yet again we are opening the gates for the tax fraudsters.”

“Following the change in regulations, it will suffice to register a company with the minimal founding capital of PLN 5,000, and then realize several transactions a day to various clients, each worth PLN 19,900,” Marek Suchowolec, a reputable expert in the sector, told Puls Biznesu. The VAT due from each of such transactions is PLN 4,600, and the tax offenses perpetrators do not pay it. The defrauded VAT tax compensates the expenses related with the founding of the company from the first day of company’s creation.”

Prior to 2013 the Polish steel industry suffered immense losses in favour of dishonest steel dealers who were able to offer prices significantly below average due to the defrauded VAT tax that allowed them to lower their prices and still have a profit margin. The honest Polish steel producers controlled only 11 percent of the total market value in 2013.

In October 2013 an amendment to the VAT law was voted through that imposed “reversed VAT charge” on the industry. The effect was immediate: the market share of the legitimate national producers of steel parts went up from the 11 percent at the end of 2013 to 45 percent after the first four months of 2014.