SEZ managers slam gov't tax proposals
By : Magdalena Wierzchowska
Managers of Poland's 15 Special Economic Zones (SEZ) were up in arms last week in response to a proposed government regulation that would significantly increase the tax liability of companies looking to invest in the zones.
If implemented, the new regulation means that companies will only be allowed to deduct 10-50% of the total value of their investments, a far cry from the 10-year tax-free holiday used to lure investors into the zones under the old law, which expired last month.
Although investment incentives were expected to deteriorate with the European Union (EU) pushing for Poland to reduce tax deductions in SEZs, few imagined that some zones would retain as little as 10% of their tax break.
The regulation realizes a law implemented at the beginning of the year that restricts the maximum tax deduction to 50%. It was accompanied with vague promises from the Economy Ministry that all zones will receive this 50% deduction status, said Krzysztof Krzysztofiak, president of Centrum Zaawansowanych Technologii-Krakow, the company that manages the SEZ Krakow Business Park. Krakow's SEZ received the lowest possible deduction of 10%.
"If the proposed conditions take effect, not a soul will be interested in the Krakow zone ... apparently the government thinks that Krakow is so developed it doesn't need any public support," Krzysztofiak said.
The new law divides Poland into 44 areas called "nuts." The level of state support for each nut is calculated using such factors as local unemployment rate or income per capita. As a result of this system, SEZs are not treated differently from the nut in which they're located.
Jaroslaw Koszarski, head of Small Enterprises SEZ, company that manages the Kamiennogorska SEZ, expects the government to issue a separate regulation for the zones. If issued, it will differentiate between zones and nuts. Elzbieta Bujakowska, specialist at the Economy Ministry's SEZ department, predicted that the zones might receive 40% deductions as a result. Bujakowska expected the regulations to be issued within two weeks.
Krzysztofiak, however, was skeptical. He said that the ministry has to issue a dozen regulations, which takes time. He was also upset that SEZs are now left in the dark. "The ministry swore they would issue regulations on time ... now we exist, but not really," he said. Koszarski agreed, saying that the meetings with potential investors in January are only a courtesy, as no business can be done when nobody knows what the rules are.
In December, hosts of investors rushed to invest in the zones, apparently in a "now or never" mood. In the Krakow Business Park, zl. 320 million ($76 million) was invested in December alone, almost doubling the total investment to zl. 700 million ($167 million). Although rough estimates by the Economy Ministry predict that zl. 8.1 billion ($1.93 billion) was invested in the zones by last year's end, newspaper Puls Biznesu estimates that zl. 13 billion ($3.1 billion) is probably a more accurate figure.
