VAT bill delay harms farmers
Counter to expectations, unprocessed Polish farm products most likely will not be levied with value-added tax (VAT) by this summer.
Expected to be passed last March, the bill that would introduce VAT on unprocessed farm products such as fish, honey, fruits and animals will most likely not be voted on in enough time to allow Polish farmers and tax offices to prepare for the new regime by July. Parliamentarians said that the bill would have to go up for vote no later than this week in order to give farmers and the tax office enough lead time to implement the law by the summer.
"For sure it won't happen by (July)," said Jan Wyrowinski, a Freedom Union (UW) deputy from Torun, who is also deputy chair of the Sejm's agriculture committee. "Maybe it will happen by October."
The law would put Polish tax laws in line with European Union (EU) regulations. It would also allow farmers to claim deductions coming from VAT taxes they have already paid on purchases of supplies or other goods.
Long in the making, the main sticking point to final passage of the bill is the initial tax rate, Wyrowinski said. Fearing to fuel inflation and cause turbulence in the agriculture sector, some deputies want the rate to be set at 0%. This level would allow food producers to introduce tax mechanisms without increasing the final price tag for food in the marketplace.
Arguing that a 0% rate will prolong the integration of the tax system with that used in the EU, the government and other deputies are pushing for an initial 3% rate. The EU now levies a 7% tax on unprocessed farm products. If Poland wants to join the EU by the end of 2002, it will have to have a similar tax rate by that time.
Roughly 20 deputies from Solidarity Election Action (AWS), which constitutes a highly fragmented part of the government coalition, have declared that they will not support the government's plan to introduce the 3% rate, Wyrowinski said.
If these AWS deputies do not change their minds, the government might not be able to muster enough votes to pass the bill, Wyrowinski said. "The process of convincing these deputies is under way," Wyrowinski said. "But it's very difficult to get them to change their position."
The failure to bring the law to a vote is a setback for many in the agriculture community. Proponents have argued that the introduction of the tax system will facilitate the integration of rural Poland into the mainstream economy because it will be forced to account for its financial transactions. Businesses keep track of the VAT they pay on goods to avoid being charged multiple times during the course of producing a product. They can deduct past VAT payments once they charge the tax on their own product.
Large food producers are particularly eager to have a chance to get VAT refunds. Until now, farmers have not been required to register as VAT payers, but they also have not been exempt from paying the tax on goods such as fuel, building supplies or fertilizer necessary for day-to-day operation of the farm.
