Rivals urge ministers to end Polish Post’s VAT advantage

Private sector postal operators in Poland have warned that government plans to open up the market to competition in 2013 could do little to improve the current situation. Polish ministers are currently in the “final phase” of drafting legislation that will bring Poland into compliance with European postal laws next year, as one of the final countries in the EU to liberalise its postal market.

Private sector companies, who can already compete in non-protected services like parcels and letters or documents above 50g in weight, have said one of the key tests of liberalisation will be whether Polish Post keeps its exemptions on VAT.

The tax on goods and services in Poland currently applies at a rate of 23%.

If the state postal operator does not have to charge customers VAT for its services, a major barrier will continue to exist to more competition improving the quality and affordability of postal services, the private sector operators argue.

“Unequal fight”

The Polish Association of Independent Postal Operators (OZPNOP) held a press conference last week to push ministers to set clear and equivocal legislation that does not continue Polish Post’s VAT advantages.

During the event, the organisation highlighted the “significant” improvements to postal services that has already been seen with more private operator involvement in the market.

The Association said its members were not sitting and waiting for the market to be liberalised, but were having to trade this year in an “unequal fight” with Polish Post. If private operators continue to struggle against the state-owned operator’s VAT exemptions, the Polish market will not end up being truly open to competition, the organisation said.

It added the warning that a lack of competition in the postal industry was not only a problem for private sector postal operators, but also for Polish business as a whole.

Wieslaw Klimaszewski, the chief executive of the Association, said: “Unclear and poorly interpreted legislation does not only raise difficulties for companies operating in the postal industry, but are also a primary barrier for the development of the Polish economy.”

The value of the Polish postal market is currently estimated to be in the area of PLN 7bn (EUR 1.7bn), with around 1.5bn letters mailed each year. Integer.pl Group said the reserved area for Polish Post – letters up to 50g in weight – represents about 75% of the mail market, generating almost half its revenue.

Private sector operators have been complaining for a few years that Polish Post is able to apply VAT exemptions designed to support the universal postal service on its business mail contracts, and that the state operator has attempted to price competition out of the market by offering below-cost rates for key customers.

Polish Post issued a statement in recent weeks in which it said it had obtained a fresh interpretation from the Ministry of Finance that supported its view regarding recent complaints about VAT exemptions in bundled packages of services negotiated with individual customers.

Integer.pl

Integer.pl Group, one of the largest private sector rivals for Polish Post trading through its InPost brand, said vaguely-worded legislation from the Polish government could even strengthen Polish Post’s monopoly position, adding to more discrimination against non-public sector companies.

The Group is currently in the curious position at the moment of adding metal plates to business letters to make them heavier than the 50g threshold under which Polish Post has a monopoly, but still claims it can provider cheaper delivery than the state-run service.

Rafal Brzoska, the Integer.pl Group chief executive, said: “We will do anything to make sure the standard and and quality of the Polish postal market will not differ from other European markets, and we believe the national operator does not provide citizens with such a guarantee.

“This industry, like any other, can expand only in conditions of free market competition. That is what we are fighting for,” added the Integer.pl CEO.

Klimaszewski said his organisation would continue to lobby for the rights of private operators to compete in the market, as consistent with European law, along with the business sector umbrella group Lewiatan (Polish Confederation of Private Employers).

“There is still much to do in this matter, because the struggle for the Polish postal market began a long time before this planned liberalisation,” he said.

“We cannot let a poorly constructed law be an obstacle to the competitiveness of Poland in the international arena.”