Poland – Having a concession does not protect the company against a tax increase

The Constitutional Court ruled on Wednesday that the tax rate on low-prizes gaming machines is compliant with the Constitution. According to the Court, “the imposition of a higher tax, in principle, can not be regarded as a restriction on the freedom of economic activity”.

The Constitutional Tribunal publicly announced that “art. 139 par. 1 of the Gambling Act of November 19th 2009 (regarding the tax rate on slot machine games with low prizes) is in line with art. 20 in connection with art. 22 of the Constitution of the Republic of Poland”. “In the remaining scope, the Tribunal discontinued the proceedings. The verdict was unanimous “- the statement reads.

“The applicant’s basic complaint (a limited liability company that submitted to the Head of the Customs Office a statement on overpayment in the tax on games – ed.) concerned infringed freedom of economic activity by introducing a tax instrument whose real and exclusive purpose was to regulate the gaming market” “The complainant pointed out a significant increase in the flat rate tax on games organized on slot machines with low prizes from the equivalent of EUR 180 monthly to PLN 2000 per month from each operated machine”- reads the announcement.

The Constitutional Tribunal drew attention in its justification to the judgment that “the imposition of a higher tax, in principle, can not be treated as a restriction of the freedom of economic activity”.

The communication states that “the Court has recognized that there are no exceptional circumstances in the case that would justify a different assessment. The challenged provision played a primarily fiscal role, and the increase in the tax rate was aimed at ensuring budget balance in a situation when tax revenues from the operation of low-prize machines decreased due to the expiry of permits to organize low-prize games”

“The applicant’s allegations also concerned the violation of property rights, the principle of equality, the prohibition of discrimination, the principle of taxation and the principle of social justice, as well as the lack of appropriate vacatio legis and respect for the social partners’ dialogue in the legislative process” – they added.

“As regards the allegations raised, the Tribunal decided that the statutory conditions for the admissibility of their substantive recognition were not met,” the announcement reads.

The Tribunal stressed that “the legislator has the freedom to shape tax rates, and the solutions adopted do not have to be identical for all groups of taxpayers, including taxpayers operating in the gambling industry. The organization of slot machine games with low prizes was characterized by basic separateness, and the tax rate was determined – in a different way than in the case of other gambling games – in a lump sum, not a percentage form”. “In such situation, the Court did not find in the complaint arguments justifying the allegation of violation of the principle of equality,” they said.

In the Court’s view, „the applicant also failed to adduce any argument or evidence that the principle of the universality of taxation has been excluded in respect of anyone or the breach of the principle of social justice. Also, the allegation of inadequate vacatio legis was not supported by an argument sufficient to recognize that formal conditions were met for the admissibility of the decision” reads the announcement after the verdict was announced.

The announcement states that the decision was issued by a five-member panel, the judging party chairman was Judge Justin Piskorski, Constitutional Court Judge Jarosław Wyrembak was the comentator.

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