Poland To Soften New Mining Levy

by Jason Gorringe, Tax-News.com, London

04 January 2012

The Polish Treasury and Finance Ministry has announced that the rate of a proposed new Polish levy, targeted mainly at copper and silver extraction, has been significantly reduced. This follows over a month of industry criticism and share price volatility.

The new tax is widely understood to have been primarily targeted at copper and silver extraction giant KGHM, Polska Miedz SA, though it applies equally to all Polish producers of these metals. State controlled KGMH is the second largest producer of copper in Europe.

The tax, announced by Prime Minister, Donald Tusk, on November 18, 2011, is due to come into effect on 1 March, 2012. The implementation date remains the same following the announcements on 2 January, 2012, though the rate of the proposed levy has been revised downwards significantly.

The exact rate of tax is determined based on global commodity prices. The original proposal would have seen the tax rate rising between a copper price floor of PLN13,000 (USD3,760) and a ceiling of PLN52,000, according to a formula. The maximum tax at a copper price of PLN52,000 was to have been PLN32,000 per ton. This upper rate has now been reduced to PLN20,000 per ton.

The announcement of a revision came as something of a surprise, following Finance Minister Jacek Rostowski’s comments in mid-December:

"We will be consulting (on) it, but we don't plan changes just because KGHM shares are falling. It's in the interest of Poland for the copper deposits to be used mostly for Poland's benefit."

However, the Treasury Ministry, in calling for the revision, explained that the proposed tax was simply too high by comparison to similar levies in other jurisdictions. Notably, the treasury revised its estimate for copper prices in 2012, which allowed it to maintain the same projected 2012 revenue forecast from the new tax, despite reducing the rate.

The levy is expected to raise PLN1.8bn for the Polish Treasury.

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