Polish Retailers Drop as Amid Plans Fast Return to Sales Tax

(Bloomberg) -- Poland's biggest retailers fall as the government pulls forward plans to restore a controversial sales tax to September.

The Polish cabinet updated its legislation agenda Tuesday, which includes fast-tracking a levy that was suspended for three years amid a European Union probe on whether it constituted illegal state aid. In May, Poland won a challenge against the European Commission's ruling, giving it the green light. Many had expected the country to wait until next year to introduce the tax.

Shares in Jeronimo Martins SGPS SA, which runs country's biggest food-store chain Biedronka, dropped as much as 6.1% in Lisbon, while Poland's leading footwear retailer CCC SA plummeted 7.4% in Warsaw. Eurocash SA, a consumer goods wholesaler that also runs several food-store chains, retreated as much as 4.3%.

The 2016 bill foresees a 0.8% levy on retailers with monthly sales exceeding 17 million zloty ($4.5 million), with the rate rising to 1.4% on higher revenue, excluding e-commerce. At the time, the government said it expected to raise as much as 2 billion zloty from the measure, that was tabled soon after a tax on banks' assets.

“Investors seem to be surprised by the fast reintroduction of the levy which will boost retailers costs already in the fourth quarter,” Lukasz Wachelko, analyst at Wood & Co. brokerage said by phone. “Still, the new burden shouldn't change positive sentiment on Polish retailers that benefit from strong economic growth and fast-growing disposable incomes of Poles.”

Jeronimo Martins' shares have gained 34% this year, with investors expecting the company to prosper from expanded social benefits in Poland, including July's introduction of a 500-zloty monthly payment for every family's first child.

A finance ministry spokesman had no immediate comment on whether the government plans a broader amendment of tax rates as it seeks a parliamentary vote to remove the suspension on the levy. Government spokesman Piotr Muller told Bloomberg the cabinet will discuss the proposal next week.

A spokeswoman for Jeronimo Martins declined to comment on the issue.

--With assistance from Henrique Almeida and Marek Strzelecki.

To contact the reporter on this story: Konrad Krasuski in Warsaw at kkrasuski@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, Monica Houston-Waesch, Jon Menon

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