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Agricultural Activity in Poland: A Fiscal and Legal Study

by Marcin Burzec (Author) Beata Kucia-Guściora (Author) Paweł Smoleń (Author)
©2020 Monographs 122 Pages
Series: Ius, Lex et Res Publica, Volume 15

Summary

Due to historical reasons, the issue of taxation of agricultural activity in Poland is of a social, economic, and even political importance. Therefore, from the Polish point of view, taxation of the agricultural activity is one of the most controversial issues of tax law. The main scope of the monograph is to cover not only theoretical, but also practical verification of the applied Polish regulations regarding taxation of agriculture. The numerous conclusions contained in the book relating to the tax regulation are supplemented by the outline of the final model of the taxation of land and agricultural incomes in Poland.

Table Of Contents

  • Cover
  • Title
  • Copyright
  • About the author
  • About the book
  • This eBook can be cited
  • Table of Contents
  • Preface
  • Chapter One: The Concept of Agricultural Activity in Tax Law
  • I. Principles of agricultural taxation: an overview
  • II. The issue of tax subjectivity
  • III. The concept of agricultural activity
  • 1. General remarks
  • 2. Definition of agricultural activity under the Personal Income Tax Act and Corporate Income Tax Act
  • a) Production of animal or plant products
  • b) Keeping purchased animals or plants
  • 3. Definition of agricultural activity under the Agricultural Tax Act
  • 4. Activities that do not fall under the definition of agricultural activity under the Agricultural Tax Act, the Personal Income Tax Act, or the Corporate Income Tax Act
  • IV. Final remarks
  • Chapter Two: Personal Income Tax
  • I. General remarks
  • II. The concept of special agricultural production - the grounds for a separate taxation system
  • III. Scope of the special branches of agricultural production
  • IV. Determination of income from the special branches of agricultural production
  • 1. The simplified income determination method
  • 2. The actual income determination method
  • 3. Tax-deductible expenses
  • 4. Determining the tax amount
  • V. Final remarks
  • Chapter Three: Corporate Income Tax
  • I. General remarks
  • II. Taxpayers
  • III. Taxation rules for special branches of agricultural production
  • IV. Tax preferences
  • 1. The general characteristic of preferences
  • 2. Exemption of the income from selling of real estate which belongs to an agricultural holding
  • 3. Tax preferences for an agricultural producers’ group
  • 4. Exemption of Agricultural Cooperatives’ and Agricultural Production Cooperatives’ Income
  • 5. Other objective exemptions
  • V. Final remarks
  • Chapter Four: Taxation of the Agricultural Land
  • I. General remarks
  • II. Taxpayers
  • III. Subject of taxation
  • IV. Tax preferences
  • V. Tax base
  • VI. The structure of the tax scale
  • VII. Final remarks
  • Conclusion
  • Bibliography
  • Index
  • Series index

Preface

In the era of economic globalization, individual states try to pursue effective agricultural support policies. There is a variety of instruments which can be used to influence agriculture. One of such instruments is an adequate tax policy design.

Undoubtedly, tax law solutions occupy an important place in the wide range of legal instruments that shape broadly understood agricultural activity. However, we should note that the concept of agricultural activity has no clear definition. Depending on the importance of agriculture to a given economy and other conditions (e.g. climatic, geographical, and infrastructural), various conceptions of taxation of such activity are used in practice. What appears crucial is the manner of taxing income from agricultural activity. Typically, this kind of activity remains subject to a specific form of income tax or land tax. This last concept is somewhat older and widely used, especially in socialist countries. Income tax, in turn, is prevalent in Western Europe. In certain countries, agricultural activity may enjoy partial or full tax exemption by virtue of agricultural development strategies.

In general, we notice a cautious approach to taxation of agricultural activity. Indeed, it manifests itself in the fact that any changes in the tax burden placed on this economic sector are intentionally lengthened: not only because of the specific nature of agricultural activity itself but also – and above all – for political reasons. We should also bear in mind that solutions applied to taxpayers occupied with agricultural activity should not lead to discriminatory policies against those who pursue non-agricultural economic activity. Another issue is the proper formulation of tax regulations for agricultural activity, so that they constitute a permanent element of an internally coherent tax system.

The issue of taxing agricultural activity in Poland has a particular social, economic, and even political importance. This is mostly for historical reasons. In recent years, agriculture has gone through too radical changes. Initially, these changes were part of the transition from a planned economy to a market economy. In the second stage, there began the process of integration of Polish agriculture into the common European policy. Thus, even a general overview of the problem allows us to assert that it comprises a wide range of different aspects which concurrently affect its complex matter. Undoubtedly, taxation of agricultural activity is one of the most controversial issues within tax law. Creating a sound tax system, which takes into consideration both the fiscal interest and the specific nature of agricultural production, is not an easy task. In this area, legal, economic, social, and political issues are strongly intertwined. All these factors contribute to the long-lasting, complicated character of the discussion on this subject. Many different, often mutually exclusive, conceptions emerge. The high political risk of such a reform is also of crucial importance.

In the current Polish conditions, the very need to reform agricultural taxation system falls beyond dispute. What remains controversial is the reform’s direction, detailed provisions, and implementation schedule. Notwithstanding the choice of a specific conception of new taxation rules, we should stress the importance of adequate tax regulations for agricultural activity – regulations which may become part of a coherent tax system in Poland. To be sure, such a perspective exceeds the scope of this monograph, which deals primarily with issues related to agricultural and income taxes. Undoubtedly, however, it is these taxes that constitute the pillar of the fiscal burden placed on agricultural activity. Therefore, we consider it necessary to analyze the conditions – especially tax barriers – which exist in this area of Polish taxation policy. In this monograph, our intention is not only to present a theoretical and practical verification of the regulations currently applied in Poland but also to project the direction of reforms and outline an adequate model of taxing land and agricultural income in this country.

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Chapter One: The Concept of Agricultural Activity in Tax Law

I. Principles of agricultural taxation: an overview

The design of each state’s tax system hinges on its sovereignty, from which its tax jurisdiction derives. Thus, undoubtedly, the shape of tax regulations is influenced by the state’s internal conditions, such as its budgetary needs, economic and social factors, but also its history. We cannot ignore the impact of economic globalization and the resulting international relations on the tax system, particularly as reflected in the process of tax harmonization under European Union law. These aspects are also evident in the design of the agricultural taxation system. Indeed, we can claim that each state’s tax policy is bound to its own agricultural policy. This applies to the Polish tax policy (both now and in the past), which translates into a particular system of taxation of agriculture (agricultural activity). Namely, the taxation of agriculture and agricultural activity is not based a monotax system but rather constitutes a specific combination of certain taxes applicable in Poland, in whose structure one may distinguish agriculture-related elements from the so-called taxation standard. This distinction assumes a variety of forms. On the one hand, there is a separate agricultural tax with an unclear typology, while on the other hand, there is a distinction of special agricultural production branches, which fall under an income tax, from non-agricultural economic activities. The peculiar nature of the taxation of agricultural activity manifests itself also in the separation of agricultural taxation principles from the general tax system through an array of tax benefits designed exclusively for agricultural activity. In this context, the literature poses the question of whether the Polish system of taxation of agricultural activity is based on a uniform and coherent tax model, or rather is a set of taxation principles that do not conform to any known model.1 Below, we shall present a general “roadmap” of Polish tax regulations which include an element related to agricultural activity or, more broadly, agriculture.

Within the doctrine of tax law, the discrimination between direct and indirect taxes is evident and unquestionable, as is the case with state and local ←11 | 12→government taxes. But one may find it more challenging to perform an unambiguous classification by nature of the tax if the criterion for this division is object-oriented and therefore entails a determination of the tax base. The doctrine of Polish tax law is not clear in this respect.2 Therefore, we present a description of agricultural activity taxes without referring to the conventional approach to tax typology. Instead, we refer to object-oriented criteria and the comprehensiveness of legal coverage of a given form of agricultural activity.

The most significant agricultural activity tax currently in force in Poland is the agricultural tax.3 It supplies the budgets of communes (gminas), but is not clear in terms of typology. Some describe the agricultural tax as a property tax, revenue tax, or revenue-property tax. However, it also has the features of a revenue-income tax, since, based on external factors, it taxes income from agricultural activity.4 This tax defines the following concepts: agricultural activity and agricultural holding, land defined as agricultural land, and the categories of taxable persons, although they are not called “farmers” in the Law. A specific element of its structure is the tax base and tax rates, which bring it close to revenue tax. Namely, the tax base is a conversion hectare, unique to this type of tax, that accounts for the type, class, and location of agricultural land, with separate conversion rates for land below ponds. The tax rate varies, as it depends on the purchase price of a quintal of rye, that is, the average price charged in the previous tax year. There is a number of subjective and objective exemptions within the agricultural tax. The considerable range of these exemptions shows a significant privilege of the agricultural sector. They concern not only situations where land cannot be freely owned – for instance, land situated on a border road strip or excluded for water bodies – but also account for instances where land is used for agricultural activities and does not generate income (land under drainage or classified as underperforming). Some of these exemptions are clearly stimulative, aiming to expand or adapt land used for agricultural activities. Additional preferential elements of this tax include tax reliefs for natural disasters, agricultural holdings located on mountains or foothills, or investments. Another principle that we can ←12 | 13→consider preferential, especially for natural persons, is the tax authority’s determination of the tax amount. In conclusion, the amount of the agricultural tax largely depends on economic and natural conditions of exercising an agricultural activity, regardless of land type, use efficiency, or other important infrastructural factors.5

Under the provisions of the Polish agricultural tax, agricultural activity is excluded from state income tax: personal income tax6 and corporate income tax.7 Although agricultural activity is not subject to income taxes in Poland, the so-called special branches of agricultural production are. They are defined in both these taxes and taxed similarly to income from non-agricultural economic activity. The tax base is income, understood, in principle, as the positive difference between income and tax-deductible costs. At the same time, instead of actual income, natural persons can have their tax base determined with the legally defined standards for estimating annual income, which can constitute a tax preference. Such a possibility is not available to corporate income taxpayers, who are obliged to determine their actual income. In personal income tax, the taxpayers can benefit from preferential elements, such as tax reliefs, joint taxation of spouses, subjective exemptions, or preferential ways of determining advance tax payments. Similarly, in corporate income tax, in a manner that does not deviate from the standards, taxpayers who run special agricultural production branches can benefit from the capital group tax structure, tax reliefs, or tax exemptions, some of which are clearly agricultural in character.8

Details

Pages
122
Year
2020
ISBN (ePUB)
9783631834688
ISBN (MOBI)
9783631834695
ISBN (PDF)
9783631834671
ISBN (Hardcover)
9783631814703
DOI
10.3726/b17557
Language
English
Publication date
2020 (October)
Keywords
tax law taxation agriculture income tax agricultural tax
Published
Berlin, Bern, Bruxelles, New York, Oxford, Warszawa, Wien, 2020. 122 pp.

Biographical notes

Marcin Burzec (Author) Beata Kucia-Guściora (Author) Paweł Smoleń (Author)

Paweł Smoleń – is a professor and head of the Department of Finance and Financial Law at the Faculty of Law, Canon Law, and Administration of The John Paul II Catholic University of Lublin. Chairman of the International Research Network KULTAX. From January 2007 is a President of the Local Government Board of Appeals in Lublin. From 2012 to 2019 he was the Vice-Rector for Finances of the University. His research and classes cover a wide range of financial law issues, with particular emphasis on the financial and legal matters at the local government level. Beata Kucia-Guściora – is a professor at the Faculty of Law, Canon Law, and Administration of The John Paul II Catholic University of Lublin. Her research and classes cover a wide range of financial law issues, with particular emphasis on international tax law. Marcin Burzec - is an associate professor at the Faculty of Law, Canon Law, and Administration of The John Paul II Catholic University of Lublin. His research and classes cover a wide range of financial law issues, with particular emphasis on tax law and comparative tax law.

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Title: Agricultural Activity in Poland: A Fiscal and Legal Study