Polish digital ad tax will paralyse consumer choice

Earlier this month, Polish government unveiled its plans to tax digital advertising.

It is argued that the so-called ‘solidarity levy’ is needed to help mitigate the coronavirus economic damage by raising funds for healthcare, culture, and heritage. However, along with bringing a severe economic disruption in the form of additional tax burden, the ‘solidarity levy’ will also be a final nail on the coffin of freedom of press and consumer choice in Poland.

After expected implementation in July 2021, media service providers and publishers (advertising through television, radio, cinema, and outdoor advertising media) whose advertising revenue on the territory of Poland exceeds PLN 1 million will be ​obliged to pay the new tax. Levy rates differ depending on the good advertised and the type of advertising, which has an explicit element of discrimination to it. Media (except the press) will pay from 2 per cent to 10 per cent. For online advertising the contribution will be 5 per cent, and that is to include digital giants. Sweetened beverages ads will be taxed at a higher rate which signals the Polish government’s drift towards more paternalism.

Through the introduction of a new contribution, the Polish government wants to kill two birds with one shot: punish independent media for its reliability and big tech for its digital ads success. At the core of this new policy, is the desire to level up the state’s role in shaping public opinion and increase its role in the digital market.

Unlike state-funded TVP channel that will be compensated through subsidies, private publishers and broadcasters such as TVN will be critically hit by the solidarity levy. According to a 2019 survey by ​Institute for Social Research and Market (IBRiS), the trustworthiness of TVP Info, is negatively ​assessed by 43 per cent of respondents, while 56 percent endorse TVN’s main news program “Fakty”. Hence it doesn’t come as a surprise that the Polish government wants to tax diversity of opinions out of the media space despite there being a great demand for it.

During protests against the tax on February 10th, Polish independent media suspended their coverage giving Polish consumers a horrendous glimpse into life without freedom of press. A well-functioning democracy cannot block opinions that divert from the government line using taxes as a means to achieve its ends. In the last year, Poland has dropped in the World Press Freedom Index, and now it ​ranks as the 62nd freest country in the world. The coronavirus pandemic has been detrimental to the freedom of press in Poland, and the proposed tax will depress it further by pushing independent newspapers, publishers, and broadcasters into extinction.

Consumer choice is pivotal, and depriving consumers of the possibility to choose between different media sources would be a step backwards for Poland, a country whose memory of Soviet totalitarianism is very much alive.

The economic reasoning behind the solidarity levy is weak: the redistribution of funds from private media to healthcare, culture and heritage sector will be more expensive than it might seem. Hundreds of thousands of Poles are employed in the content production field both on a national and local level, and as a result of the tax, they will lose their jobs. The Polish government will then need to take responsibility for this distortion.

More than ​40 statewide and local publishers sent an ​open letter to the Polish authorities arguing against the tax. ​The situation where the state media receive PLN 2 billion annually at the expense of Polish taxpayers, and the private companies are to be charged with an additional PLN 1 billion, they argue, is deeply unfair. Such actions on the side of the Polish government threaten competition in the media market by giving an unfair advantage to the state-funded ones. It should only be up to consumers to decide who takes lead in the market, and who loses.

The solidarity levy on digital advertising pursued by the Polish government is not economically sound and threatens the freedom of press not just in Poland, but in Europe overall. Thirty years ago the Iron Curtain fell sending a promise of freedom and prosperity in Europe, and we need to preserve it. Digital ad taxes is the idea that should have never come to life.

Originally published here.

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