EuroCommerce, which represents national retail organisations on a European scale, has formally protested against Slovakia's new tax on foreign-owned companies. The organisation thinks this law breaches European law on two accounts, and has therefore filed as many complaints.
Breach of freedom
The new tax lays claim to 2.5 % of foreign companies' turnover and is supposed to raise 87 million euros. Eurocommerce's legal attack is twofold: on the one hand, a tax of which only local companies are exempt, is a discrimination according to the "freedom of establishment" principle. On the other hand, such a tax is also a kind of unlawful state aid, the branch organisation says.
The organisation's director-general, Christian Verschueren, said: “International retail companies have invested billions of euros in offering Slovak consumers modern, competitive supermarkets with a wide range of quality products. Despite this, Slovak legislators consciously chose to focus on foreign-owned retailers, and to exempt virtually all Slovak competitors, with the clear objective of deterring foreign investors. This deliberate move will unavoidably mean less choice and higher prices for Slovak consumers.”
Following Hungary and Poland
Slovakia is not the first country to try out such a law aiming only at foreign companies. Hungary and Poland went before them, but saw their attempts reverted by the European Commission. Verschueren has also noticed this trend: “This law is part of a wider and growing trend of protectionism and populist policies against retailers, especially in Central and Eastern Europe. These Member States are seeking to control the way our members do business, restrict what they sell, and levy disproportionate fines. This is all aimed at protecting local competitors and driving out foreign companies. These countries benefit greatly from the single market, yet want to disapply it when it suits them politically.”
“Retail is a low margin business. Grocery retailers’ margins are typically less than 3%. A 2.5% tax on turnover therefore wipes out their profits, and forces them into making a loss. This will inevitably have significant consequences for future investment in the country”, the organisation concludes with a thinly veiled threat.