Moody's: Retail tax may wipe out Tesco's profits

Rating agency Moody's said in its report that a tax on retailers proposed by Poland's government is credit negative for the largest foreign retailers operating in Poland, in particular for Tesco and Carrefour. This is because they generate monthly sales of more than PLN300 million and will be subject to the highest rates of tax. "The proposed sales tax could amount to Tesco and Carrefour’s entire Polish businesses' operating profit. The Polish operations of these two large retailers already have low EBIT margins, which we estimate at between 1 percent and 3 percent," the report read. "If implemented, we do not anticipate any rating impact for Tesco and Carrefour, which are internationally diversified companies, as Polish sales make up only a small percentage of both retailers' total sales," Moody's stated. The agency also expect that "over the medium term the cost of the tax will largely be passed on to consumers through price increases."