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State aid, Poland and the EU
The EU Commission, in its recently published report on state aid, found that Poland granted on average ?2.4 billion in state aid to local business for the four-year period leading up to accession, representing 1.29 percent of GDP, or, to put it another way, the equivalent of ?63 per person.
Article 87 of the Treaty Establishing the EU states: "Aid granted by a Member State or through state resources in any form whatsoever which distorts or threatens to distort competition by favoring certain businesses or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market."
The EU Commission, in its recently published report on state aid, found that Poland granted on average ?2.4 billion in state aid to local business for the four-year period leading up to accession, representing 1.29 percent of GDP, or, to put it another way, the equivalent of ?63 per person. In contrast, state aid granted in the original 15 member states during the same period, expressed as a percentage of GDP, amounted to only 0.4 percent. Following accession, Poland, along with the other new member states, will be able to continue to grant state aid in accordance with the terms of the Treaty of Accession, subject to the imposition of certain transition periods, and still comply with Article 87 of the Treaty Establishing the EU.
Types of state aid
The three most popular means by which Poland grants state aid include tax exemptions (34 percent), grants (32 percent) and guarantees (23 percent). State aid is further broken down into three categories: horizontal aid, including employee training and environmental projects; regional aid, including the special tax treatment afforded to businesses located in special economic zones; and sectoral aid, representing direct assistance to specific industries, such as the coal and steel sectors. The coal sector got the largest amount of state aid by far, receiving ?3.9 billion in 2002 alone, representing 56 percent of all state aid granted in Poland during this four-year period.
Who controls state aid?
Prior to EU accession, state aid was administered by the Office of Competition and Consumer Protection. Following accession, control of state aid shifted to the EU Commission. However, the Office of Competition and Consumer Protection is responsible for coordinating the preparation of all state-aid requests prior to their submission to the EU Commission for approval, with the exception of 25 aid programs that have received prior consent from the EU to continue to operate without the need to obtain EU approval. Beneficiaries of state aid, along with the government authorities who award such aid, are required to submit periodic reports of the use of such state aid to the Office of Competition and Consumer Protection, which in turn is required to inform the EU Commission.
Transitional periods
Poland negotiated for, and received, three separate transition periods in the Treaty of Accession regarding state aid. Specifically: state aid to restructure the steel industry may continue until the end of 2006; state aid in the form of tax breaks awarded to businesses located in special economic zones may continue until either the end of 2010 or 2011, depending on the size of the business; and state aid for environmental projects may continue for staggered periods, depending on the nature of the project and the additional transition periods Poland negotiated to fully implement EU environmental standards.
In general, horizontal state aid does not violate EU regulations. Sector-specific aid, such as to the coal and steel sectors, however, does tend to distort the Common Market.
Source: http://www.wbj.pl
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