As we read in the letter published on the website of the Nowogrodziec Municipal Office:
Dear Ladies and Gentlemen
Members of the Sejm and SenateThe Mayor of Nowogrodziec and the Head of Osiecznica Municipality hereby request that you, Members of the Sejm and Senate, undertake an urgent legislative initiative concerning amendments to the Railway Transport Act, in the context of limiting the possibility for entrepreneurs to exclude land forming part of railway infrastructure from real estate tax, because the current legal situation enables blatant abuses against which municipalities are powerless.
At the end of 2016, the Railway Transport Act was amended, redefining the concept of railway infrastructure in a manner inconsistent with European Directive 2012/34/EU. At the same time, the Act on Local Taxes and Charges was also amended with regard to exemptions from real estate tax for such infrastructure. As of 1 January 2017, the amended Act on Local Taxes and Charges exempts from real estate tax not only, as had previously been the case, structures and the land beneath them, but also buildings and land forming part of railway infrastructure. This change is significant because it introduces a tax exemption for buildings that had not benefited from any exemption before and extends the exemption for land, which previously could be exempt only on condition that it was occupied by structures forming part of railway infrastructure. At present, entire cadastral plots forming part of railway infrastructure are exempt.
In this context, we wish to point to a specific example from Nowogrodziec Municipality and Osiecznica Municipality. A company operating in Nowogrodziec Municipality submitted an application to the Mayor of Nowogrodziec for a declaration of overpayment of real estate tax, enclosing corrected real estate tax returns for 2017–2020. As justification for its application, the company indicated that it owned a railway siding which, together with the adjacent infrastructure, was to be exempt from real estate tax [...]. As a result of having a railway siding on its land, the company excluded practically the entire area of its real estate holdings—approximately 90 ha—on which it conducts mining-related business activity, from taxation, even though the area occupied by the siding amounts to only around 5% of that surface, because the main part of the plant and the siding are located on the same cadastral plot. The amount of the real estate tax correction exceeded PLN 2,000,000. This represents a substantial loss in the budget of Nowogrodziec Municipality.
What is the situation in Osiecznica Municipality?
In the letter signed by the Head of Osiecznica Waldemar Nalazek and the Mayor of Nowogrodziec Robert Relich, we read:
An analogous situation exists in Osiecznica Municipality, where the same entrepreneur also submitted an application for a declaration of overpayment of real estate tax together with corrected returns for 2017–2020, excluding from taxation a cadastral plot of approximately 90 ha on which it conducts mining-related business activity and where a railway siding is located. It should be emphasized that the railway line running through Osiecznica is not in operation, while the siding and railway tracks are used solely by this entrepreneur and for purposes connected with its business activity. The financial effect of the correction submitted for 2017–2020 exceeds PLN 2,500,000. This situation will also have consequences in the future. In 2021, the situation described will reduce the municipality’s real estate tax revenue by approximately PLN 800,000, representing a decline of more than 10% in income from this source.
Thus, under the current legal situation arising from the Railway Transport Act and the Act on Local Taxes and Charges, virtually every real estate taxpayer with a railway siding on its property may take steps to eliminate or radically reduce its real estate tax liability, to the detriment of the municipalities in whose areas it conducts business activity. This may also distort fair competition, because entrepreneurs without railway sidings will pay real estate tax under the existing rules, without any exemptions, which directly translates into operating costs. Examples include Leśna Municipality and Platerówka Municipality, where entrepreneurs with a similar business profile operate but without sidings on land belonging to them; these entities therefore cannot expect a reduction in the standard amount of real estate tax, which increases the costs of operating in the same production market.
Representatives of local government units have repeatedly informed the Ministry of Finance, the Ministry of Infrastructure and the Chancellery of the Prime Minister about this legally defective situation—as assessed by the Mayor of Nowogrodziec and the Head of Osiecznica Municipality—also pointing to the faulty implementation of secondary EU law in Polish legislation in this respect. [...]
The local officials add:
For our part, we firmly state that the current situation connected with the new legal framework introduced in 2017 concerning the taxation of railway infrastructure is contrary to the interests of the Polish state, municipalities and many entrepreneurs whose competitiveness in the market may be distorted by defective regulations, given the entitlement to excessive real estate tax exemptions granted to a limited group of entrepreneurs possessing elements of railway infrastructure on their land.
The financial losses incurred by local governments and many entrepreneurs in this area are substantial. In the case of local governments alone, they are estimated—moderately—at PLN 1,400,000,000 annually. In the current difficult times associated with the COVID-19 epidemic, this represents a huge gap in the budgets of municipalities, which are already burdened with numerous other tasks and obligations while their budget revenues are declining.
Given the nature of the matter, we ask you to address it urgently so that the defective provisions can be amended before the end of November 2020, since only in that situation could the new solutions enter into force on 1 January 2021.
What do you think? We invite you to join the discussion.