Poland’s new tax on banks could end up costing the financial sector a total of roughly €1bn during 2016. According to the credit rating agency Moody’s, the tax, which comes into effect in February, may threaten Polish banks’ credit ratings and profitability.
The new tax, which was approved by the both the upper and lower houses of Poland’s parliament earlier in January 2016, will see banks pay new taxes on assets of over PLN 4bn (roughly €900m), while for insurers the threshold will be half of that. Loan companies will also see their threshold put at PLN 200m (€44m). According to the Financial Times, Polish lenders will be required to pay “0.44 percent of their adjusted assets every year”. Based on this, “Moody’s estimates this will cost the sector PLN 4.4bn (€1bn) this year, which equates to 32 percent of banks’ annual earnings for the first 10 months of 2015/16”.
These new charges could result in returns on bank assets and equity falling by a third. This, Moody’s claims, would severely curtail the ability of banks to absorb external shocks. Credit growth was also said to be under threat, as the new tax will limit banks’ capital creation. The end result of this, Moody’s warned, would be slower GDP growth in Poland.
New taxes on banks have formed a key part of the ruling conservative Justice and Law Party’s election promises. What’s more, the taxes will extend not just to banks, but also to supermarkets. Speaking during the debate in the Polish parliament, Development Minister Mateusz Morawiecki said that the new tax was nothing unique to Poland, as “bank taxes have already been introduced in a majority of EU countries, and many other countries around the world. In this sense we are only doing the same as other countries”.
This is not the first time that Poland’s ruling party has drawn criticism from credit rating agencies. Early in January, Polish banks also saw their rating downgraded by Standard & Poor, to a BBB+ rating. According to Reuters, Felix Winnekens, S&P primary credit analyst for Poland, said in a statement at the time that “the downgrade reflects our view that Poland’s system of institutional checks and balances has been eroded significantly”.