The global minimum tax was designed to limit tax competition between countries and ensure that the largest multinational groups pay an effective tax rate of at least 15%, regardless of where they operate. In practice, however, the new regulations are raising increasing concerns.
Poland’s Ministry of Finance stresses that it is sceptical about the solution itself and expects revenues to be lower than commonly assumed. Businesses, meanwhile, warn that the tax could undermine one of Poland’s important competitive advantages: its system of tax incentives and exemptions for investors.
“It is too early to talk about the effects of the global minimum tax. What is certain is that it creates a significant administrative burden,” Dr Jarosław Neneman, Undersecretary of State at the Ministry of Finance, told Newseria.
“It is no secret that, during its presidency, Poland wanted to secure a suspension of the directive in order to allow time to clarify relations with the Americans, but this did not succeed. We were outvoted. We are not fans of this tax, but it exists and must be collected. We have to adapt to the new regime.”
The global minimum tax, known as Pillar Two, is part of the OECD’s international efforts to limit base erosion and profit shifting to low-tax jurisdictions. In the European Union, the solution has been introduced through a directive, while in Poland it has been implemented through the Equalisation Tax Act.
The rules apply to the largest corporate groups with consolidated annual revenues exceeding EUR 750 million.
Tax Incentives at Risk
Poland points out that the new rules may have particular consequences for countries that compete for investment through tax support systems. This includes incentives for companies operating in special economic zones or within the Polish Investment Zone, as well as research and development tax relief.
Some of these incentives may reduce a company’s effective tax rate and therefore trigger the need to pay a top-up tax.
“Investment incentives are a very interesting but difficult issue. Investors say they need more. Various public institutions say more incentives are needed. I am not a major fan of incentives, but they exist, and they exist in other countries too,” says Dr Neneman.
“What the Americans did has somewhat overturned the table on incentives. There was a risk that the entire Polish system of tax relief would have to be rebuilt. Poland managed to secure quite a lot, and part of the existing support system will remain in place.”
An additional source of uncertainty is the changing position of the United States on the global minimum tax. Washington was initially one of the main supporters of the international agreement, but later began seeking separate treatment for US-based groups.
In practice, the uniform global regime has become less consistent, while EU countries, including Poland, must continue to apply regulations that may affect their investment policies.
“We will monitor what happens and try to impose the lowest possible administrative burden on taxpayers, because this is a highly complex tax. As for the revenues it will generate, we have serious doubts that they will be significantly lower than commonly expected,” the Deputy Finance Minister says.
Complex Rules and Administrative Burdens
From the perspective of businesses, the core problem is that the new regulations are inherently complex. Applying them requires costly analysis, calculations and reporting. Although the rules affect only the largest corporate groups, they still represent a substantial administrative burden for those companies.
“The regulations concerning the global minimum top-up tax are not business-friendly, and they were never intended to be, because this is an equalisation tax,” says Przemysław Pruszyński, Director of the Tax Department at the Lewiatan Confederation.
“It is, to some extent, a punitive tax imposed on large multinational corporations that do not pay taxes at an appropriate level.”
However, he stresses that the issue in Poland is not limited to companies engaging in aggressive tax optimisation. Some businesses pay lower corporate income tax because they use legal incentives granted by the state in return for investment, job creation or research and development activity.
“If a company in Poland has invested in building a factory, it may benefit from preferential rules, such as operating in a special economic zone, and receive an exemption from corporate income tax. In such a case, it may end up being required to pay a top-up tax,” warns the Lewiatan Confederation representative.
“What has been our competitive advantage in the fight for companies, jobs and investment in Poland may be lost because of the global minimum top-up tax.”
Businesses Call for Protection of Investment Support
Business experts argue that without adjustments, Poland may lose some of its advantages in competing for new investment projects. If a tax incentive granted to an investor is effectively neutralised by the top-up tax, the value of that incentive will clearly decline.
Businesses are therefore calling for changes that would protect legal investment-support mechanisms. The key issue is ensuring that companies benefiting from exemptions in special economic zones, the Polish Investment Zone or research and development relief are not treated in the same way as entities that reduce taxation by shifting profits abroad.
The Ministry of Finance says it remains in contact with businesses, but has not yet determined the direction of possible changes. As Jarosław Neneman points out, it is first necessary to assess how the tax will function in practice.
The original aim was to generate benefits by limiting international tax competition and making it more difficult to shift profits to low-tax jurisdictions. Following the change in the US position, however, this objective has become more difficult to achieve.
“Let us give it some time and see what effects this tax produces. The Polish government is fairly sceptical about both the idea itself and the way this tax functions,” Jarosław Neneman concludes.
The Lewiatan Confederation takes a similarly critical view and currently sees no clear economic benefits for Poland from implementing the global minimum tax.
“Perhaps the Ministry of Finance sees additional budget revenues or an opportunity to prevent income from being shifted out of Poland. But from the perspective of Poland as a country that needs capital inflows, companies and investment, introducing this tax is simply unfavourable. It weakens our competitiveness. I am unable to identify any positives,” says Przemysław Pruszyński.
The issue of the global minimum tax was discussed during the Lewiatan Confederation Tax Council Congress, held in Warsaw on 16 June.
