Are tax reliefs meaningless? Investment is attracted by something else

Changes to the tax system of the European Union and its individual countries are taking away the attractiveness of tax reliefs. Investors prefer those countries that offer them grants. This is disadvantageous for Poland.

Tomasz Rolewicz, partner in EY’s Tax Advisory Department, pointed out during the debate “Investments and their financing” at the EEC Trends conference in Warsaw that support mechanisms are not homogeneous and, above all, their meaning and attractiveness change over time, inter alia, under the influence of changes introduced in support systems by other countries.

In Poland, for years investors had a choice of two types of support which could be combined. On the one hand, there was a financial grant of up to 10 per cent of the investment value, and on the other hand, tax relief of up to 30 per cent.

“In the past it was an appropriate level of support but regulations and legal conditions in the European Union or in our neighbouring countries are changing. Every country wants to attract investors, so tax systems have started to compete with each other. Some of our neighbouring countries have changed their approach to investment support, moving away from tax reliefs and towards grants”, said Tomasz Rolewicz.

He recalled that tax changes introduced in the European Union prescribe that if tax reliefs are used in some country where the company has invested, the country where the company is based must make up for the difference in taxes. Thus, support in the form of tax reliefs has become unattractive – investors therefore prefer schemes that guarantee support in the form of grants.

Paweł Jarski, CEO of Elemental Holding, pointed out the convergence of support systems within the European Union, in contrast to the USA, where individual states compete fiercely for new investors.

“The US market is very much seeking investors, with individual states competing fiercely against each other. In the European Union, I no longer see such a difference”, said Paweł Jarski at EEC Trends and noted that in Poland it is already possible to use most of the financial instruments available in Western European countries or the USA.