“Digital” Tax in Poland: Another Harmful and Unjustified Surcharge

• The saga of the “digital” tax continues. It has recently been renamed a “compensatory” levy, implying that foreign digital companies operate unfairly in Poland. The bill is ready but has still not been made public, making an informed debate more difficult.
• The narrative surrounding the “compensatory” tax rests on an alleged shortfall in corporate income tax revenue, without showing its scale, and on anti-market slogans used to justify another sectoral surcharge.
• Much of the levy will be passed on to customers and small businesses through higher service prices.
• The tax offers no meaningful fiscal benefit: projected revenues appear overstated and would in any event finance, at most, 0.1% of bloated government spending. Instead of imposing another surcharge, policymakers should focus on reducing expenditure and undertaking systemic public finance reforms.

The Polish Ministry of Digital Affairs has moved to the next stage of works on the digital tax bill. Another sectoral levy will almost certainly increase service prices for consumers and smaller businesses. The estimated — and probably overstated — tax revenues of PLN 1.7–4 billion will not materially improve public finances, whose problems stem from excessive spending rather than insufficient revenue.

At the end of January, Deputy Prime Minister Krzysztof Gawkowski announced that the digital tax bill was ready. The ministry requested that the proposal be entered in the government’s legislative work program, a prerequisite for beginning the legislative process, and in early February presented the draft at a closed meeting with representatives of industry organizations and civil society. It is puzzling that the ministry has not published the bill when it is ready and could already be subject to public scrutiny.

“Compensation” in the Name of Collective Responsibility

The Ministry of Digital Affairs has called the proposed levy a “compensatory tax on certain services”. Its stated intention is to “compensate” for a loss of corporate income tax revenue allegedly caused by systematic unfair practices by large digital companies on the Polish market. The problem is that there are no estimates of this shortfall or a timetable for the proposed “compensation”: the bill itself does not provide a sunset clause for the tax.

Moreover, whatever that is this if not collective responsibility — demanding payment from the main digital industry players, which do pay taxes on services provided in Poland and publish their financial statements, for the alleged wrongdoing of particular companies? If such wrongdoing has occurred, it should be investigated, the amounts assessed and payment enforced. No other justification for “compensation” has been presented publicly. The same rhetoric, likewise without identifying specific “culprits” or the scale of the alleged shortfall, is used to justify other sectoral surcharges.

It is well known that many digital services, including those that would be taxed, are cross-border in nature and provided by companies operating worldwide. For this reason, the OECD has been working on a global levy. At the beginning of this year, 147 countries reached an agreement on a global minimum tax, known as Pillar Two. In Poland, rules on top-up taxation of multinational companies have been in force since 1 January 2025, offsetting potential revenue shortfalls arising from various tax practices. This partly overlaps with the objectives of the digital tax.

Higher Prices for Customers

The levy would be set at 3% of revenue from certain services, such as placing targeted advertising on a digital interface (for example, AdSense); making available a multi-sided digital interface that allows users to interact or can facilitate transactions (apps such as Uber); and transferring user data for a fee. The taxpayer would be an entity or tax group with global annual turnover of at least EUR 1 billion and annual Polish revenue from the services subject to taxation exceeding PLN 25 million. In practice, the tax would cover a dozen or so of the largest companies operating globally and a small number of domestic businesses, mainly Allegro. Exemptions would include financial services, such as banking apps, and websites publishing editorial content.

Another significant consideration is the expected passing-on of the surcharge to consumers and small businesses using digital services. This has happened in countries where such taxation already applies, so there is little reason to expect Polish service users will escape it. In reality, this sectoral tax will hit customers.

There is also the question of whether a tax designed in this way can actually be enforced against, for example, entities based in Asia that operate in Poland’s e-commerce market. In practice, the tax authorities may find it very difficult to verify reliably the information in returns submitted for the “digital” levy — quite apart from the actual solvency of the entities representing large Asian companies in the EU market.

A Tax to Cover Small Portion of Excessive Expenditure

According to the assumptions, the tax would provide the state budget with an additional PLN 1.7 billion in its first year, PLN 2 billion in its second year and PLN 4 billion in its tenth year. These forecasts are substantially overstated when compared with actual receipts from similar taxes elsewhere in Europe.

Of course, the tax bases and design of “digital” taxes differ across countries: taxing a broader range of services may generate higher receipts. The revenue thresholds determining which entities are liable also differ. Poland’s proposed global revenue threshold is EUR 1 billion, compared with EUR 750 million in France, Austria, Spain and Türkiye, and GBP 500 million (EUR 575 million) in the United Kingdom. Fewer entities would therefore qualify for the Polish tax on the basis of global revenue. Domestic revenue thresholds for taxable services — PLN 25 million in Poland’s proposal — range from around PLN 1.6 million in Türkiye and PLN 13 million in Spain, through PLN 105 million in France and Austria, to more than PLN 120 million in the United Kingdom.

Bearing these caveats in mind, we estimate that the new tax would generate between PLN 380 million and PLN 1.5 billion for the Polish government.

Table 1: Estimated revenue from the “digital” tax, based on receipts in other countries

Source: FOR calculations based on the Tax Foundation, the World Bank, and data from statistical offices and government agencies.

Tax revenue, even using the Ministry of Digital Affairs’ forecasts, would therefore be negligible. Other sectoral surcharges of limited budgetary significance, such as the bank tax and the large-store retail tax, generated PLN 6.5 billion and PLN 4.4 billion respectively in 2024. By contrast, total Polish government expenditure is set to reach almost PLN 2.2 trillion this year. According to the bill’s proponents, the digital tax would therefore ultimately finance less than one-thousandth (0.1%) of government spending.

Anti-Market Slogans

Moreover, some stakeholders, clearly encouraged by the bill’s proponents, would like the receipts to finance, among other things, “reliable journalism”, with this earmarking written into the bill as mandatory expenditure. This mechanism would create a harmful dependence of the media on those in power, making potential grants to newsrooms conditional on whether their coverage met the funders’ expectations. From a public finance perspective, it would further reduce the levy’s contribution to lowering the deficit.

The anti-market and protectionist rhetoric of the tax’s proponents is striking. At the closed meeting in early February, the need for a tax was justified with slogans about digital sovereignty, foreign corporations allegedly “taking money out of Poland” and their use of — also alleged — “tax engineering”. Added to this are protectionist calls to favor domestic companies.

This was one reason why the annual global turnover threshold was raised from the initial EUR 750 million to EUR 1 billion, even though the European Union presents no significant barriers to the growth of Polish businesses: they can operate, including abroad, on the same terms as companies from outside Poland. Preferences for domestic entities may also breach EU internal market freedoms, which require public authorities not to discourage companies established in one Member State from doing business or providing services in another.

The Balance Is Decidedly Negative

Let us therefore weigh the anti-market slogans used to justify the “digital” tax, the absence of an analysis of alternative ways to address taxation problems — if such problems exist — the actual ability of the affected entities to pay, the expected budget revenues, and the international environment in which we operate. A cost-benefit assessment suggests that this tax will not significantly increase budget revenue. It is welcome that the Ministry of Finance has so far been cautious about the proposal. We should hope that its leadership understands that tax policy should not be pursued through high-profile initiatives that do not necessarily deliver the expected results.