Published: 08/07/2020

In 2018, the CIT gap was PLN 22 billion, 35 per cent less than in 2014. At the same time, CIT accounted for 5 per cent of State revenue in Poland, distinctly below the EU average of 7 per cent. A vital problem is the shifting of profits to tax havens – in 2018 alone transnational corporations artificially transferred from Poland profits of PLN 17 billion, which translated into CIT revenue foregone exceeding PLN 3 billion.

An important component of the gap is the so-called ‘foreign CIT gap’, or revenue foregone as a result of profit transfers to other countries by enterprises, mostly transnational corporations. In 2018, such transfers totalled PLN 17 billion; therefore, the resulting foreign CIT gap was PLN 3.2 billion and represented 15 per cent of the overall CIT gap.

75 per cent of the amount of PLN 17 billion was transferred to three countries: Ireland (PLN 5 billion), the Netherlands (PLN 4 billion) and Luxembourg (PLN 3 billion). In 2014–2018, the ‘foreign CIT gap’ was on the rise, being approximately 40 per cent higher in 2018 than in 2014. The situation in Poland reflected world trends as in 2015–2017 global profit transfers jumped from USD 616 billion to USD 741 billion, i.e. by 20 per cent.

The EU must reduce tax avoidance to cover its development-oriented expenditure

CIT avoidance by businesses is a phenomenon whose scale has increased across the world in recent years due to globalisation, the rising market power of the largest firms and the sophistication of tax regulations. As it is of a global nature, appropriate solutions must be supranational. Tax solidarity within the European Union is of key importance as the report demonstrates that the vast majority of corporate profits are transferred to EU Member States. Therefore, the PEI proposes the implementation of the following solutions:

• Creating the EU’s blacklist of tax havens;
• Giving the European Commission the power to impose sanctions on countries engaged in unfair tax competition;
• Introducing ‘compensatory taxation’, i.e. adopting a minimum rate of corporate income tax subject to no relief or exemption;
• Establishing an obligation for multinational enterprises to disclose information on their tax strategies and the standardisation of the collection of such data at the EU level;
• Incorporating tax solidarity and clear policy for fighting tax fraud and tax avoidance into the EU agenda, with a special focus on the situation of the Member States losing the most to tax avoidance and evasion.

Due to the COVID-19 pandemic and the resulting economic crisis, the need for increasing the EU’s financial resources has become exceptionally pressing and necessary to be resolved. The fiscal tools likely to cover the EU’s expenditure indispensable to return to a path of permanent economic growth and sustainable development include digital tax, capital gains tax, tax on access to the EU’s common market and financial transaction tax.