Taxation of Farms in the European Union and Its Sensitivity to Economic Indicators: Evidence from Poland (2004–2022)

Abstract

The aim of this study is to present the taxation of the Polish farm sector in the years 2004–2022 in comparison with other EU countries. Three indicators were applied to describe the phenomenon: the value of taxes per farm, the share of taxes in family farm net income, and the value of taxes per hectare of agricultural utilized area. The analysis is based on data from the FADN database. Results for Poland were contrasted with those of other EU Member States. In addition, the sensitivity of the Polish farm tax burden to twelve basic production, economic, and financial categories was examined using the ordinary least squares method with a constant term. The findings were compared with EU averages, providing a descriptive overview of how tax burdens interact with farm performance and sustainability conditions.

1. Introduction

Sustainable agriculture is an approach which, as a system and a philosophy, is based on values rooted in ecological and social awareness. It means different things to different people, but the primary goals of sustainable agriculture are environmental health, economic viability, and social and economic equality (often depicted as the “three legs” of the sustainability stool) [1]. Roy and Chan [2] defined sustainable agriculture as an agricultural practice that consistently meets basic conditions that should be compatible with ecological stability, economic viability and socially equitable farming systems. Taxes play a key role in sustainable agriculture, influencing investment decisions, resource allocation and overall profitability [3]. Taxes, despite the existence of various other forms of influence, still remain an important instrument in state fiscal policy [4].

This paper provides descriptive evidence about agricultural taxation in the European Union. Specifically, the article analyzes the level and structure of taxation of Polish farms in 2004–2022 in comparison with other EU countries, using FADN data. The purpose is to show how tax burdens interact with production, economic and financial variables and to what extent they influence the conditions for sustainable agriculture. The paper does not test formal hypotheses but rather systematizes existing solutions and documents cross-country differences. In addition, it offers a comparative overview of national tax systems applied in the agricultural sector in EU Member States.

We examine the level of farm taxation not because the data are unknown, but because its effects depend on the structure of farm incomes and their capacity to absorb fiscal burdens. Even relatively small taxes may strongly affect liquidity, investment and resilience of Polish farms due to their lower income base and limited access to external financing.

Researching agricultural taxation levels is important because taxes significantly shape the operating conditions of farms and their investment and development opportunities. Analyzing tax systems allows us to understand how fiscal burdens affect the sector’s competitiveness, land ownership structure, and decisions regarding modernization and the implementation of pro-environmental practices. The diversity of solutions used in individual countries shows that taxation can both support smaller farms and sustainable forms of production, or lead to their marginalization. Conclusions from such studies help assess the extent to which tax policy supports the achievement of sustainable development goals, equal opportunities between farms, and building agricultural competitiveness in the European and global markets.

In Poland, the importance of these mechanisms has been taken into account in the “Strategy for sustainable development of rural areas, agriculture and fisheries 2030” (Polish: “Strategia zrównoważonego rozwoju wsi, rolnictwa i rybactwa 2030”) [5] document, developed by the Minister of Agriculture and Rural Development. It is a fundamental strategic document of the state’s agricultural and rural development policy, presenting the objectives, directions of intervention, and actions to be taken in the perspective of 2030. One of the important assumptions of the strategy is to support sustainable development of small, medium and large farms. In line with the implementation of the concept of sustainable development, it is assumed that environmental and climate objectives should be integrated to a greater extent into other policies, and therefore also into tax policy. This means that in the near future, the practical role of tax law in the implementation of the sustainable development goals will increase [6]. If the sustainability standards are finalized and published, future entities will be required to disclose climate-related risks and opportunities in their financial statements [7]. But we should remember that the effectiveness of policies ultimately depends on farmers’ behavioral responses [8].

Until now, there has been no comprehensive comparative study of agricultural tax systems across EU countries. This paper contributes to filling this gap by providing a systematic overview and a comparative analysis of the Polish case within the EU context.

2. Literature Review

2.1. Specificity and Challenges of Agricultural Taxation in Poland in the Context of the European Union

The specific nature of agricultural activity has led Polish legislators to introduce a separate agricultural tax, which effectively replaces the income tax [9].

The lack of income tax in agriculture raises a huge social and economic problem. In the social aspect, it is related to the growing reluctance of the non-agricultural society to subsidize farms, and in the economic aspect, it concerns the financing of budget expenditures that are sourced from the tax burden on other social groups [10]. Such a construction of the tax system, which privileges certain economic entities, may encourage economic activity or lead to economic abuse. This situation is conducive to the existence of the grey economy, which most often arises when the purchaser is not interested (for tax reasons) in obtaining evidence documenting the concluded transaction. This is the case in Polish agriculture [11]. It also raises serious concerns in the context of so-called social justice, which constitutes a serious deviation from the principle of universal income taxation and entails a reduction in budget revenues [12].

Farmers, apart from those subject to VAT under the general rules, are not interested in obtaining documents, as they will not gain any tax benefits from this. This seems to be the reason why part of the economic circulation (especially in the service sector) remains outside the fiscal control of the state [11]. The current tax system of Polish agriculture is ineffective both for the state and for agriculture itself [12].

The introduction of income tax in agriculture is also supported by solutions adopted in other European Union (EU) countries [10]. At the same time, in agricultural taxation models in the European Union, the tax base is net income, i.e., the difference between income from agricultural activities and the costs incurred in connection with running a farm. In most European countries, unlike in Poland, the tax base includes aid received from both national and EU budgets [13].

A common feature of modern tax systems is the special treatment of agriculture. For example, we can mention the following taxes: revenue tax (Portugal—revenue from the sale of real estate), income tax (France—income from a farm), property tax (Cyprus—real estate tax). A common feature of EU systems is that local taxes provide financial autonomy to local government units. Typical local taxes are municipal taxes, which include real estate tax and agricultural tax in Poland and community tax in Denmark. In tax systems in other EU countries, farms are burdened with income tax, often paid as a flat rate [14]. Looking at agriculture in Poland in detail, the sector is subject to taxes such as agricultural tax on land, real estate tax, tax on means of transport, forest tax, VAT and income tax on special divisions. In view of Poland’s membership in the European Union since 2004, it is worth tracing how the taxation of agriculture has evolved, using farms in individual EU countries as an example.

It should be noted that the criticism of agricultural taxation emphasizes that it does not equalize the economic and natural conditions of farming and does not sufficiently limit the influence of differential rent I on the result of agricultural activity, which is why it is proposed to replace it with an income tax, fulfilling a fiscal and motivational function [15]. The impact of agricultural income taxation on the economic situation of individual farms from the area of intensive agriculture It is worth emphasizing that the agricultural tax in Poland, as a property fiscal burden, is related to the fact of owning land, and it does not take into account the obtained income from the sale of agricultural products and income from activity. The construction of this tax was aimed at reducing the burden of agricultural activity. The preferential tax rates maintained are a slight burden on the farmer’s income, and therefore they cannot be treated as a motivational instrument—supporting or inhibiting specific investment activities carried out by farmers [16].

However, in Poland, there has been an ongoing discussion for years about changes to the agricultural tax financing system. These changes were proposed because of the widespread belief that the fees collected by farmers are low or that farmers do not pay taxes. The actual situation is somewhat more complicated [17]. The system has not changed over the last twenty years [18].

2.2. Agricultural Taxation Systems in the EU

There is no single, harmonized agricultural taxation system in the European Union. Each Member State independently shapes its tax system with regard to farms, which results in a significant diversity of legal solutions and fiscal practices.

The diversity of agricultural tax systems across European Union countries stems from numerous historical, economic, and social factors [19]. In countries with a tradition of small-scale farming, taxes often serve a protective function for small farms, limiting their fiscal burden and providing them with greater economic stability [20]. In countries where commercial agriculture predominates, the tax system is more complex, linked to social insurance and market-based support mechanisms [21]. These differences also reflect differing models of local government financing [22]—in some countries, agricultural tax is a significant source of municipal revenue, while in others its fiscal significance is marginal.

This mosaic is further complicated by the conflicting goals of agricultural and environmental policies. In some countries, taxes and tax relief serve as a tool to promote pro-ecological practices, supporting, for example, organic farms or investments in climate protection [23]. In others, this role is primarily assumed by direct subsidies and Common Agricultural Policy mechanisms, and the tax system remains neutral towards sustainable development. Additionally, the level of economic development translates into the complexity and enforcement of regulations—wealthier countries are more likely to have extensive tax and control mechanisms, while lower-income countries prefer simpler solutions and incentives.

Differences in taxation can partially explain key variables for agriculture in Europe. First, they influence farm competitiveness—lower tax burdens encourage investment and enable price competition, while higher tax burdens can limit development capacity [13]. Second, they determine the agrarian structure, which either supports or hinders the concentration of land in the hands of larger entities [24]. Third, they influence the pace of implementation of sustainable agricultural practices if the tax system is linked to climate and environmental policy [25]. However, they are not the only factor—subsidies, EU and national regulations, and the market situation also play an equally important role. Analyzing the level and differences in taxation allows for a better understanding of the mechanisms shaping agricultural development in the EU, although it does not provide a complete answer without considering the broader political and economic context [23].

Taxation policies towards agriculture vary between countries but can be divided into several main categories: income and capital taxes, social security contributions, labor taxes, real estate taxes and taxes on goods and services (including VAT). Although the agricultural sector is subject to these burdens, it often benefits from tax reliefs that imply preferential treatment and lead to a loss of some budget revenue [20]. The agricultural sector has traditionally benefited from certain tax reliefs and often from a specific mode of taxation due to the specific characteristics of agricultural production (i.e., seasonality, dependence on climatic factors, lower efficiency); however, these are only specific solutions, operating within uniform systems, which also cover non-agricultural sectors [26].

Although this sector is certainly affected by the imposition of various tax regulations, it also benefits in comparison with other thanks to the granting of tax reliefs. A given tax measure is considered a “tax relief” for agriculture if it results in differential treatment of the sector in such a way that agriculture is favored, resulting in some lost tax revenue or “tax expenditure” [20].

In most EU Member States, current agricultural taxation systems are the consequence and result of their evolution. Despite noticeable differences, tax systems have many common features, which result from the nature and definition of tax as a historical category related to the theory of statehood and private property [19]. Tax schemes and rates are subject to the sovereign decisions of EU Member States. However, in most EU Member States, the rules governing the taxation of agriculture are similar to those in other sectors of the economy, although in many cases agriculture benefits from tax preferences [27]. Tax harmonization serves to harmonize tax rules across countries to ensure consistency and comparability. The European Union does not seek to fully harmonize tax systems, mainly due to the differing national interests of individual countries. The aim of the measures taken is to limit potential distortions in the functioning of the internal market by approximating rates and the rules for determining the tax base [19]. One of the fundamental challenges faced by EU Member States is the pursuit of unification of tax systems as part of a broader process of fiscal integration and consolidation of the single market [28].

In general, two main approaches (systems) to agricultural taxation can be distinguished:

-

Universal taxation system—Agriculture is subject to the same tax regulations as other professional groups: no instruments supporting agriculture were used in the tax structure (e.g., Finland). In the tax structure, various solutions favoring the development of agriculture were applied, e.g., investment allowances (e.g., Netherlands, Spain, Belgium, UK, Ireland, Denmark, Sweden, Slovakia).

-

Special (preferential) taxation system—Separate tax regulations for farmers aimed at reducing their tax burden (e.g., Austria, Germany, France, Italy, Poland) [29].

In EU countries, farmers are generally subject to the same tax regulations as other socio-professional groups. However, in many EU countries, farmers are not obliged to keep accounts, but some countries have introduced mechanisms to encourage them to do so, such as the possibility to deduct accounting costs from income (e.g., in France, Germany, and the Netherlands) [13].

An analysis of the tax systems in the agriculture of European Union countries shows that farmers are obliged to pay most of the standard public taxes, including income taxes (comprising both personal income tax and corporate income tax), property taxes (such as tax on real estate (land and buildings), as well as taxes related to the transfer of property by inheritance, donation, or sale), and indirect taxes (primarily value added tax (VAT), which charges both producers and consumers), which significantly affect their activities [4].

Agricultural activity is mainly subject to income tax on earned income, and different interpretative solutions result in a lower fiscal burden [13]. Agriculture in the EU benefits from tax preferences based on the specifics of production but also benefits from specific solutions applied to non-agricultural sectors. Agricultural taxation systems mainly focus on the taxation of agricultural income, agricultural real estate, goods, and services [30]. In most EU countries, agricultural taxation systems are not separate from the systems operating in the country. Income derived from agricultural activities is taxed. Due to the specific nature of agriculture, structures are often used to reduce the tax burden borne by farmers [13]. All countries offer different tax treatment for their agricultural sectors. These reliefs are more common in personal income tax regimes than in corporate income tax [20].

Table 1. Grouping all 27 EU countries according to similarities in agricultural tax regimes.

Group	Countries	Characteristics
1	Austria, Bulgaria I, Czech Republic, Slovakia, Hungary, Lithuania I, Latvia I, Estonia II, Poland	Flat or simplified agricultural taxation; relief for small and family farms; land tax often simplified or low.
2	France, Germany, Italy, Spain, Finland, Ireland, Denmark, Sweden, Greece	General taxation with numerous reliefs and exemptions; land tax with exceptions; extensive investment and environmental preferences.
3	Cyprus, Malta, Netherlands	No or abolished tax agricultural land tax; VAT preferences and other indirect taxes; low property burden.
4	Belgium, Romania, Slovenia, Croatia, Portugal	Strong regional variation, decentralized tax systems; local rates and regulations.
5	Luxembourg	Mixed and comprehensive systems; support for organic farming; special regulations for contributions and indirect taxes.

Source: Own elaboration based on [20,31]. Legend: ^I Bulgaria, Lithuania, Latvia—countries with clear support for simplified forms of tax settlements but with a significant role of land taxes. ^II Estonia—mixed and comprehensive systems; support for organic farming; special regulations for contributions and indirect taxes.

was developed based on [20,31] and is an adaptation of the existing classification of taxes in agriculture. The presented typology is comparative and diagnostic in nature, not estimative.

Table 1 shows a classification of the 27 European Union countries based on similarities in agricultural taxation systems. There are 5, or even 6 groups of countries (group 6: Bulgaria, Lithuania and Latvia), which differ mainly in the form and degree of simplification of taxation, the presence of a tax on agricultural land and the extent of tax reliefs and preferences:

Group 1 comprises countries where simplified or flat-rate taxation prevails, with preferences for small and family farms and usually low or simplified taxes on agricultural land; mixed countries with simplified tax settlements and a significant role of land tax are also included in this group.

Group 2 includes countries that apply the general principles of agricultural income taxation, but with numerous reliefs and exemptions, including preferential land tax rates and investment support, often also with an emphasis on sustainable development.

Group 3 comprises countries that have abolished or do not apply a tax on agricultural land and the agricultural sector benefits from VAT preferences and other reliefs, characterized by low property burdens.

Group 4 distinguishes countries with strong regional tax differentiation and decentralized systems where rates and rules vary by region.

Group 5 contains countries with tax systems combining different models, with a strong emphasis on support for organic agriculture and regulations of social security contributions and indirect taxes.

This classification provides an insight into the variety of approaches to agricultural taxation in the EU and highlights opportunities for the exchange of good practices and harmonization at European level.

The agricultural tax systems in EU countries (Table 1) are very different, but they share a common objective—to ensure the stability of farmers’ incomes and to support the modernization of farms. Member States combine administrative simplification with ensuring fiscal transparency in different ways. Their common feature, however, is reduced VAT taxation and tax preferences for investment and environmental activities. The European Union’s agricultural taxation system serves not only to generate revenue for the state, but also to influence economic entities by stimulating or discouraging investment and economic activity. However, many EU countries apply special VAT schemes for agriculture, such as a flat rate for farmers, which aims to simplify accounting and reduce the administrative burdens, regardless of the main income tax system.

In the context of agriculture, it also aims to reduce the tax burdens on the sector, increase its profitability, simplify tax records and impact on farms in line with the overall direction of agricultural policy. From the perspective of European integration, it is worth continuing to exchange good practices and to analyze the impact of tax systems on the competitiveness of agriculture in the different countries.

3. Materials and Methods

Aim and Methods

The main objective of the article was to determine the level of tax burden on farms in the European Union. The generally available FADN database [32] was used. It is developed for commercial farms from the European Union countries. Respecting the principle of secrecy, the data from this database are aggregated, covering at least 15 farms [33].

The research period covered the years 2004–2022. In order to achieve the assumed research goal, three indicators were developed with the following formulas:

-

$\mathrm{t}\mathrm{a}\mathrm{x} \mathrm{b}\mathrm{u}\mathrm{r}\mathrm{d}\mathrm{e}\mathrm{n} \mathrm{o}\mathrm{n} \mathrm{f}\mathrm{a}\mathrm{r}\mathrm{m}={\displaystyle \frac{\mathrm{t}\mathrm{a}\mathrm{x}\mathrm{e}\mathrm{s} \left(\mathrm{S}\mathrm{E}390\right)}{1farm}}$ [euro/1 farm],

-

$\mathrm{s}\mathrm{h}\mathrm{a}\mathrm{r}\mathrm{e} \mathrm{o}\mathrm{f} \mathrm{t}\mathrm{a}\mathrm{x}\mathrm{e}\mathrm{s} \mathrm{i}\mathrm{n} \mathrm{f}\mathrm{a}\mathrm{r}\mathrm{m} \mathrm{n}\mathrm{e}\mathrm{t} \mathrm{i}\mathrm{n}\mathrm{c}\mathrm{o}\mathrm{m}\mathrm{e}={\displaystyle \frac{\mathrm{t}\mathrm{a}\mathrm{x}\mathrm{e}\mathrm{s} \left(\mathrm{S}\mathrm{E}390\right)}{\mathrm{f}\mathrm{a}\mathrm{r}\mathrm{m} \mathrm{n}\mathrm{e}\mathrm{t} \mathrm{i}\mathrm{n}\mathrm{c}\mathrm{o}\mathrm{m}\mathrm{e} \left(\mathrm{S}\mathrm{E}420\right)}}$ [%],

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$\mathrm{t}\mathrm{a}\mathrm{x}\mathrm{e}\mathrm{s} \mathrm{o}\mathrm{n} 1 \mathrm{h}\mathrm{e}\mathrm{c}\mathrm{t}\mathrm{a}\mathrm{r}\mathrm{e} \mathrm{o}\mathrm{f} \mathrm{U}\mathrm{A}\mathrm{A}={\displaystyle \frac{\mathrm{t}\mathrm{a}\mathrm{x}\mathrm{e}\mathrm{s} \left(\mathrm{S}\mathrm{E}390\right)}{\mathrm{u}\mathrm{t}\mathrm{i}\mathrm{l}\mathrm{i}\mathrm{z}\mathrm{e}\mathrm{d} \mathrm{a}\mathrm{g}\mathrm{r}\mathrm{i}\mathrm{c}\mathrm{u}\mathrm{l}\mathrm{t}\mathrm{u}\mathrm{r} \mathrm{a}\mathrm{l}\mathrm{a}\mathrm{r}\mathrm{e}\mathrm{a} \left(\mathrm{S}\mathrm{E}025\right)}}\left[\mathrm{e}\mathrm{u}\mathrm{r}\mathrm{o}/1 \mathrm{h}\mathrm{a}\right]$.

It is worth taking a look at what the studied variables in the FADN database cover [32,34]:

• “taxes” means farm taxes and other dues (not including VAT and the personal taxes of the holder) and taxes and other charges on land and buildings. Tax subsidies are not included.
• “family net income” is remuneration to fixed factors of production of the family (work, land and capital) and remuneration to the entrepreneur’s risks (loss/profit) in the accounting year. This income is calculated by adding to the net value added the balance of subsidies and taxes related to investments and subtracting the cost of external factors.
• “utilized agricultural area” consists of land in owner occupation, rented land, land in share-cropping (remuneration linked to output from land made available). It includes agricultural land temporarily not under cultivation for agricultural reasons or being withdrawn from production as part of agricultural policy measures but does not include areas used for mushrooms, land rented for less than one year on an occasional basis, woodland and other farm areas (roads, ponds, non-farmed areas, etc.). It is expressed in hectares (10,000 m²). As of 2014, it includes kitchen gardens.

These three indicators are shown for all EU member states for the period 2004–2022. The UK was included for the period 2004–2020. For 2022 alone, data for Croatia and Malta are still missing (as of 15 May 2025). This was the first part of the research, guided by the following research question: What is the level of farm taxation in the European Union in absolute and relative terms?

Knowing that taxes are an exogenous variable, set by the government and imposed on taxpayers, it was decided to perform an experimental study. Since taxpayers have no influence over taxes, would the opposite be true—would taxes be related to some elements of financial statements? It was assumed that they should be related, but the degree and strength of this relationship is an open question. In view of this, the second part of the research formulated the following research question: Which items of farm financial statements are affected by the taxes paid by the farm? Here, the results for Poland were compared with the average results observed in the European Union. This analysis can be called a study of sensitivity of selected 12 basic production, economic and financial categories of an agricultural holding to the variable taxes. The set of these variables is presented in

Table 2. Selected production, economic and financial categories of farms used to study their sensitivity to taxation in Poland and the European Union in the years 2004–2022.

Variable Name	Descriptive Name of the Variable [Unit of Measurement]	Symbol in FADN
Y	Taxes [euro/1 farm]	SE390
X01	Labour Input [AWU/1 farm]	SE010
X02	Utilized Agricultural Area [ha/1 farm]	SE025
X03	Total Output [euro/1 farm]	SE131
X04	Total Inputs [euro/1 farm]	SE270
X05	Farm Net Income [euro/1 farm]	SE420
X06	Total Assets [euro/1 farm]	SE436
X07	Liabilities [euro/1 farm]	SE485
X08	Net worth [euro/1 farm]	SE501
X09	Net investment [euro/1 farm]	SE521
X10	Cash Flow [euro/1 farm]	SE526
X11	Subsidies [euro/1 farm]	SE406 + SE605
X12	Net Working Capital [euro/1 farm]	SE465–SE495

Source: own study.

. This is the first study of this type in Poland. The Gretl program was used. The study was performed using the classical least squares method with a constant. Here, the initial database consisted of object-years from Poland for the period 2004–2020 and was extracted from the FADN database according to the criterion of economic size class and region, as these are very detailed data for farms. A total of 808 observations were obtained according to this criterion. The same survey was performed for the entire European Union; the UK data was not removed.

The article hypothesized that the tax burden on Polish farms is relatively lower than in other EU countries, but it significantly affects farm performance, especially in terms of net income, investment capacity, and asset accumulation.

The hypothesis regarding the relatively lower tax burden in Polish agriculture, which nevertheless exerts a significant impact on farm performance, requires further explanation. The level of tax rates alone does not determine their impact. The structure of farm income, the nature of taxes, and the ability of farms to absorb fiscal burdens are crucial.

First, the income of Polish farms is generally lower and more volatile than in many Western European countries [35,36]. Consequently, even lower percentage taxes can significantly reduce farmers’ disposable income [37]. This phenomenon is particularly evident on small farms, where the income base is limited and fiscal burdens compete directly with investment and consumption needs.

Second, some taxes in Poland—such as land tax—are fixed amounts, not percentages [24]. This means that their burden is felt relatively more strongly by smaller farms, for which such burdens constitute a larger share of income. Additionally, regular contributions linked to the farmers’ social insurance system (KRUS), although nominally lower than in Western systems, must be paid regardless of seasonal income fluctuations, limiting the ability to accumulate capital [38].

Third, Polish farms have a limited ability to absorb financial shocks [39]. Poorer access to credit, lower capitalization levels, and limited reserves mean that even relatively small taxes can significantly limit financial liquidity and investment capacity. These burdens accumulate with other fixed costs, such as energy, fertilizers, and debt service, further intensifying their impact on net profit [40,41].

As a result, the formally lower tax burden in Poland may have comparable, or even more severe, consequences for farms than higher taxes in countries with a higher income base [42]. The ultimate impact of taxes on farm performance should therefore be analyzed not only in terms of nominal rates, but also through the prism of their impact mechanisms, cost structure, and farms’ ability to absorb fiscal burdens.

4. Results

In order to achieve the intended research objective,

Table 3. The quotas of taxes burden on farm in the countries of the European Union in 2004–2022 (euro/1 farm).

Country	Value of Taxes Burden on Farm (Euro/1 Farm)							2022/2004
	2004	2008	2012	2016	2020	2021	2022
Austria	671	900	959	838	1163	1182	1159	1.73
Belgium	1421	1857	2216	2591	3244	3261	3391	2.39
Bulgaria	-	54	532	183	350	387	417	-
Croatia	-	-	-	539	750	822	-	-
Cyprus	37	63	68	151	109	98	89	2.41
Czech Republic	3364	3351	1785	1781	2461	2505	2486	0.74
Denmark	3971	4453	3984	4457	5716	5729	5596	1.41
Estonia	207	262	377	504	579	626	641	3.10
Finland	162	251	398	998	1347	1292	1016	6.27
France	1986	2001	2204	2198	2198	2230	2320	1.17
Germany	1954	1944	2238	2645	2932	3389	4535	2.32
Greece	59	72	113	173	158	200	326	5.53
Hungary	563	583	549	577	943	821	811	1.44
Ireland	124	150	202	144	133	132	137	1.10
Italy	888	1102	1904	2172	1037	997	1208	1.36
Latvia	279	301	500	673	1028	1009	1003	3.59
Lithuania	76	105	105	119	183	217	211	2.78
Luxembourg	947	1213	1327	1345	1859	2065	2222	2.35
Malta	83	58	32	0	0	0	-	-
Netherlands	3158	3175	3975	4040	4956	4851	5120	1.62
Poland	190	380	337	393	469	439	438	2.31
Portugal	69	127	160	259	160	235	288	4.17
Romania	-	148	150	190	465	447	484	-
Slovakia	10,857	10,086	6707	6128	6079	6087	6726	0.62
Slovenia	43	50	26	48	78	79	133	3.09
Spain	286	374	506	609	644	666	725	2.53
Sweden	101	117	163	142	170	147	0	0.00
United Kingdom	1007	729	872	607	667	-	-	-
EU average	715	632	805	854	912	935	1054	1.47

Light blue—the lowest 5 scores, dark blue—the highest 5 scores. Source: Own study and calculations based on [32].

,

Table 4. The share of taxes in farm net income in the countries of the European Union in 2004–2022 (%).

Country	Share of Taxes in Farm Net Income (%)							2022/2004
	2004	2008	2012	2016	2020	2021	2022
Austria	2.87	2.93	3.37	3.36	3.46	2.89	2.06	0.72
Belgium	3.10	4.21	3.44	4.51	4.97	4.64	2.80	0.91
Bulgaria	-	1.04	6.00	2.12	1.61	0.99	0.92	-
Croatia	-	-	-	6.51	6.21	6.17	-	-
Cyprus	0.60	0.64	0.81	2.54	0.68	0.72	0.55	0.90
Czech Republic	13.84	11.79	3.95	5.08	4.42	4.39	2.84	0.21
Denmark	63.04	(−)8.45	6.69	51.91	5.37	5.78	2.66	0.04
Estonia	1.32	1.53	1.40	(−)34.05	2.43	2.28	1.21	0.92
Finland	0.79	1.25	1.85	7.42	4.38	3.68	1.93	2.43
France	6.62	5.77	4.56	8.10	5.64	3.83	3.01	0.46
Germany	6.52	7.13	4.51	6.49	7.34	5.93	5.02	0.77
Greece	0.48	0.53	1.00	1.59	1.31	1.53	2.08	4.31
Hungary	8.76	3.55	2.84	2.87	3.21	2.44	2.12	0.24
Ireland	0.70	0.80	0.92	0.59	0.49	0.37	0.28	0.40
Italy	4.45	5.08	7.80	6.45	2.79	2.46	2.87	0.65
Latvia	3.13	2.48	3.71	4.92	5.03	6.26	3.87	1.24
Lithuania	1.07	0.68	0.65	1.17	0.88	1.07	0.63	0.58
Luxembourg	2.57	2.88	3.28	3.40	2.84	3.57	2.09	0.81
Malta	0.58	0.37	0.33	0.00	0.00	0.00	-	-
Netherlands	10.51	10.50	5.78	5.56	5.51	4.09	2.90	0.28
Poland	3.11	4.64	3.10	5.01	3.86	2.77	1.79	0.58
Portugal	0.84	1.12	1.18	1.60	1.08	1.21	1.25	1.48
Romania	-	2.59	2.86	4.14	4.46	2.91	3.07	-
Slovakia	(−)172.85	1213.72	(−)99.17	7.64	11.92	9.71	9.11	−0.05
Slovenia	0.71	0.89	0.52	0.89	1.02	0.94	0.65	0.91
Spain	1.11	1.47	2.36	1.80	1.61	1.58	1.64	1.47
Sweden	1.94	0.45	1.03	0.75	0.69	0.36	0.00	0.00
United Kingdom	3.63	1.62	1.80	1.76	1.52	-	-	-
EU average	3.99	3.95	4.15	4.65	3.38	2.90	2.52	0.63

A minus means that the farm has suffered a loss but has paid taxes. Light yellow—taxation below 1%, dark yellow—taxation above 5% of farm net income. Source: Own study and calculations based on [32].

and

Table 5. The taxes on 1 hectare of UAA in the countries of the European Union in 2004–2022 (euro/1 ha).

Country	Taxes on 1 Hectare of UAA (Euro/1 ha)							2022/2004
	2004	2008	2012	2016	2020	2021	2022
Austria	21.88	28.59	30.38	28.78	33.85	35.08	34.36	1.57
Belgium	34.84	42.13	43.98	52.30	59.60	59.68	63.90	1.83
Bulgaria	-	2.35	14.20	4.10	4.50	5.04	5.50	-
Croatia	-	-	-	35.41	46.79	51.28	-	-
Cyprus	3.62	7.81	8.16	14.70	9.07	8.35	7.99	2.20
Czech Republic	14.76	14.90	8.96	9.39	9.83	9.80	9.78	0.66
Denmark	50.92	48.42	41.23	40.52	38.30	38.15	36.77	0.72
Estonia	1.95	2.32	2.81	3.74	3.78	4.10	4.26	2.19
Finland	3.49	4.81	7.00	15.60	17.46	16.53	12.97	3.72
France	24.73	23.67	25.38	25.05	23.63	23.71	24.65	1.00
Germany	26.14	25.01	25.46	29.81	28.66	32.78	42.83	1.64
Greece	7.91	9.56	11.86	16.73	15.96	19.25	31.50	3.98
Hungary	11.55	10.40	11.33	12.80	17.94	15.85	15.35	1.33
Ireland	2.94	3.27	4.10	2.99	2.71	2.86	2.99	1.02
Italy	58.27	74.46	114.56	103.23	45.84	43.03	51.08	0.88
Latvia	4.80	4.44	7.07	9.94	13.83	13.75	13.68	2.85
Lithuania	2.40	2.41	2.26	2.41	3.52	4.16	4.11	1.71
Luxembourg	13.97	15.89	15.82	16.19	20.23	22.14	23.14	1.66
Malta	31.20	19.27	11.76	0.00	0.00	0.00	-	-
Netherlands	103.81	91.39	105.83	104.15	121.71	119.42	124.00	1.19
Poland	12.08	19.37	18.05	20.08	21.56	20.53	20.60	1.71
Portugal	2.87	4.98	6.03	11.06	6.67	9.68	11.17	3.89
Romania	-	17.35	16.13	20.45	18.67	17.89	18.41	-
Slovakia	17.87	17.23	14.13	13.36	14.66	14.82	16.42	0.92
Slovenia	3.97	4.63	2.38	4.79	6.82	6.88	11.57	2.92
Spain	8.40	10.02	12.64	13.11	14.57	15.18	15.42	1.84
Sweden	1.15	1.29	1.60	1.33	1.62	1.39	0.00	0.00
United Kingdom	7.04	4.83	5.54	3.82	4.32	-	-	-
EU average	20.38	21.14	24.41	24.67	21.00	23.18	25.32	1.24

Light green—the lowest 5 scores, dark green—the highest 5 scores. Source: Own study and calculations based on [32].

were constructed, presenting the development of taxes, their share in net farm income and the value of taxes per hectare of farmland in the European Union countries in the years 2004–2022.

At the beginning of the analysis, it should be noted that in the European Union, the average annual amount of taxes paid by a farm ranged from €715 in 2004 to €1054 in 2022 (Table 3). In contrast, the average income from a family farm in the EU-25 in 2004 was €17,940 and in the EU-27 in 2022 €41,753, with an average farm area of 35.1 ha in 2004 and 41.6 ha in 2022, respectively [32]. During the period analyzed, farms from Cyprus, Greece, Ireland, Malta, Slovenia, and Sweden were the least taxed, with results often in the range of €0–210. The highest farm taxes were paid in Belgium, Denmark, France, Germany, the Netherlands and Slovakia, ranging from €2200 to over €10,800 (Table 3). It should also be added that the tendency to increase taxation prevailed in the years under study.

During the period under study, the share of taxes in farm net income fell. This was due to a faster increase in income than in the tax burden. On average in the EU, farm taxation represented from almost 4% in 2004 to approx. 2.5% in 2022 as a share of income (Table 4). It is important to clarify here that outliers occurred when farms generated very low income or recorded a loss, and this did not exempt them from taxation. The highest tax burden on income (above 5%) can be seen in countries such as Croatia, the Czech Republic, Denmark, France, Germany, Italy, the Netherlands and Slovakia (Table 4). It can also be noted that the lowest share of taxes in income (less than 1%) was observed in Cyprus, Ireland, Lithuania, Malta, Slovenia, and Sweden (Table 4).

In the period under study, the average EU taxation of 1 hectare of agricultural land increased from approx. 20 euro to 25 euro (Table 5). The record-holder for taxation per hectare was the Netherlands, with a result exceeding €100/1 ha. Apart from this country, high taxation per hectare was also found in Belgium, Denmark and Italy. In contrast, the lowest taxation per hectare, actually below €5 per hectare, occurred in countries such as: Estonia, Ireland, Lithuania, Malta, and Sweden (Table 5).

Focusing on Poland, it should be noted that, on average, a farm in Poland paid €190 in taxes in 2004 and as much as €438 in 2022 (Table 3). At the same time, farm net income increased from €6110 to €24,482 and the area of agricultural land increased from 15.7 ha in 2004 to 23.3 ha in 2022 32]. This means that taxes increased 2.3 times, income increased 4 times, and farmland area only 1.5 times. As a consequence, the share of taxes in the income of Polish agricultural holdings fell from 3.1% to 1.8% over the period under study (Table 4). Thus, the taxation per hectare of a farm increased from €12/1 ha in 2004 to almost €21/1 ha in 2022 (Table 5).

Table 6. Results of modelling the effect of independent variables on the variable Taxes (European Union, n = 10,641).

No.	Independent Variable Model	Coefficient	Standard Error	t-Student	p-Value	Determination Coefficient R2	F(1, 10,641)
1.	Labour Input	464.6090	4.77	97.42	0.0000	0.4714	9490.13
	const	427.9120	42.10	10.17	0.0000
2.	Utilized Agricultural Area	13.1610	0.15	90.29	0.0000	0.4338	8152.53
	const	775.3510	42.29	18.33	0.0000
3.	Total Output	0.0075	0.00	107.70	0.0000	0.5215	11,596.58
	const	319.5680	40.10	7.97	0.0000
4.	Total Inputs	0.0075	0.00	109.40	0.0000	0.5293	11,964.60
	const	412.2720	39.34	10.48	0.0000
5.	Farm Net Income	0.0208	0.00	48.15	0.0000	0.1789	2317.96
	const	1237.0300	51.61	23.97	0.0000
6.	Total Assets	0.0026	0.00	90.94	0.0000	0.4373	8269.85
	const	97.3366	45.59	2.14	0.0328
7.	Liabilities	0.0047	0.00	56.48	0.0000	0.2306	3190.03
	const	1304.0500	48.50	26.89	0.0000
8.	Net worth	0.0036	0.00	88.38	0.0000	0.4233	7811.50
	const	35.7212	46.74	0.76	0.4448
9.	Net Investment	0.0262	0.00	25.28	0.0000	0.0566	638.93
	const	2018.4900	51.24	39.39	0.0000
10.	Cash flow	0.0245	0.00	73.30	0.0000	0.3355	5372.72
	const	469.8480	48.84	9.62	0.0000
11.	Subsidies	0.0397	0.00	14.99	0.0000	0.4345	8178.06
	const	642.2510	42.86	14.99	0.0000
12.	Net Working Capital	0.0136	0.00	98.16	0.0000	0.4752	9634.85
	const	391.5750	42.08	9.31	0.0000

Dark orange (not occurred)—the p level below 0.05 and R² above 0.90; medium orange—the p level below 0.05 and R² below 0.90; light orange (not occurred)—the p level between 0.05 and 0.10, R² between 0.00 and 0.99. Source: Own study and calculations.

shows the results of the regression performed on 1063 object-years, i.e., farms from the European Union from 2004 to 2022. The relationship between the value of taxes paid, and selected production, economic and financial categories on the farm were analyzed, using regression models with one variable and a constant. Assuming a significance level of p below 0.05 and a model explanation degree R2 above 90%, it was determined which categories were related to taxes. The study was then repeated, removing heteroscedasticity (

Table 7. Results of modeling the effect of independent variables on the variable Taxes, corrected for heteroscedastic (European Union, n = 10,641).

No.	Independent Variable Model	Coefficient	Standard Error	t-Student	p-Value	Determination Coefficient R2	F(1, 10,641)
1.	Labour Input	140.9330	1.98	71.13	0.0000	0.3223	5059.53
	const	820.3070	29.03	28.25	0.0000
2.	Utilized Agricultural Area	16.0918	0.21	76.30	0.0000	0.3536	−25,926.62
	const	590.7250	23.77	24.85	0.0000
3.	Total Output	0.0038	0.00	2593.00	0.0000	0.9984	6,724,955.00
	const	393.6230	8.82	44.65	0.0000
4.	Total Inputs	0.0026	0.00	64.21	0.0000	0.2793	4123.20
	const	524.1500	12.82	40.90	0.0000
5.	Farm Net Income	−0.0405	0.00	−99.23	0.0000	0.4806	9845.99
	const	2891.6200	49.88	58.00	0.0000
6.	Total Assets	−0.0003	0.00	−7.16	0.0000	0.0048	51.21
	const	8974.3200	829.69	10.82	0.0000
7.	Liabilities	0.0086	0.00	41.33	0.0000	0.1383	1708.25
	const	758.8340	33.90	22.39	0.0000
8.	Net worth	−0.00002	0.00	−47.27	0.0000	0.1736	2234.73
	const	606.0510	10.24	59.19	0.0000
9.	Net Investment	0.0249	0.00	15.47	0.0000	0.0220	239.27
	const	1896.2700	47.57	39.86	0.0000
10.	Cash flow	0.0088	0.00	12.66	0.0000	0.0148	−30,784.04
	const	799.1830	35.46	22.54	0.0000
11.	Subsidies	0.0394	0.00	377.20	0.0000	0.9304	142,284.00
	const	507.7020	20.90	24.29	0.0000
12.	Net Working Capital	0.0113	0.00	75.23	0.0000	0.3472	5659.51
	const	316.0240	13.83	22.85	0.0000

Dark yellow—the p level below 0.05 and R² above 0.90; medium yellow—the p level below 0.05 and R² below 0.90; light yellow (not occurred)—the p level between 0.05 and 0.10, R² between 0.00 and 0.99. Source: Own study and calculations.

). Heteroscedasticity has been removed. Heteroscedasticity is perhaps most often considered in cases of linear regression through the origin, although that is by no means the limitation of its usefulness [43]. Heteroscedasticity refers to a phenomenon where data violate a statistical assumption. This assumption is known as homoscedasticity. When the homoscedasticity assumption is violated, this can lead to increased Type I error rates or decreased statistical power. Because this can adversely affect substantive conclusions, the failure to detect and manage heteroscedasticity could have serious implications for theory, research, and practice. In addition, heteroscedasticity is not uncommon in the behavioural and social sciences [44].

Considering the results for the European Union countries, the first regression analysis did not provide satisfactory results. It can only be concluded that taxes are indirectly related to all categories (Table 6). On the other hand, a repeated test without heteroscedasticity showed the strongest association with total output and subsidies (Table 7). Thus, it can be concluded that taxation imposed on output is compensated by subsidies in a directly proportional way.

Different results were obtained for Poland. The first study showed a correlation between taxes and utilized agricultural area, subsidies and net working capital (

Table 8. Results of modelling the effect of independent variables on the variable Taxes (Poland, n = 635).

No.	Independent Variable Model	Coefficient	Standard Error	t-Student	p-Value	Determination Coefficient R2	F(1, 633)
1.	Labour Input	1138.2300	21.31	53.41	0.0000	0.8184	2852.79
	const	−1768.7400	168.80	−10.48	0.0000
2.	Utilized Agricultural Area	32.8387	0.29	112.50	0.0000	0.9524	12,655.29
	const	−538.6360	80.29	−6.71	0.0000
3.	Total Output	0.0164	0.00	42.69	0.0000	0.7422	1822.17
	const	−434.5450	189.32	−2.295	0.0220
4.	Total Inputs	0.0171	0.00	54.35	0.0000	0.8235	2954.22
	const	−336.0970	154.73	−2.17	0.0302
5.	Farm Net Income	0.0457	0.00	9.70	0.0000	0.1294	94.06
	const	1129.7900	361.20	3.13	0.0018
6.	Total Assets	0.0094	0.00	67.59	0.0000	0.8783	4568.73
	const	−2023.1000	138.86	−14.57	0.0000
7.	Liabilities	0.0411	0.00	56.01	0.0000	0.8321	3137.67
	const	−575.1610	152.43	−3.77	0.0002
8.	Net worth	0.0117	0.00	59.63	0.0000	0.8489	3555.77
	const	−2202.4700	157.02	−14.03	0.0000
9.	Net Investment	0.1424	0.01	12.29	0.0000	0.1927	151.09
	const	2062.23	312.91	6.59	0.0000
10.	Cash flow	0.0684	0.00	20.20	0.0000	0.3920	408.10
	const	−607.8680	314.87	−1.93	0.0540
11.	Subsidies	0.1382	0.00	92.92	0.0000	0.9317	8634.13
	const	−707.5400	96.97	−7.30	0.0000
12.	Net Working Capital	0.0354	0.00	79.67	0.0000	0.9093	6347.44
	const	−501.2070	110.96	−4.52	0.0000

Dark orange—the p level below 0.05 and R² above 0.90; medium orange—the p level below 0.05 and R² below 0.90; light orange (not occurred)—the p level between 0.05 and 0.10, R² between 0.00 and 0.99. Source: Own study and calculations.

). Removing heteroscedasticity from the models changed the results and showed a relationship between taxes and labour inputs, total inputs, net worth and net working capital (

Table 9. Results of modeling the effect of independent variables on the variable Taxes, corrected for heteroscedastic (Poland, n = 635).

No.	Independent Variable Model	Coefficient	Standard Error	t-Student	p-Value	Determination Coefficient R2	F(1, 633)
1.	Labour Input	944.0920	11.95	78.97	0.0000	0.9079	6236.82
	const	−1310.8100	33.61	−39.00	0.0000
2.	Utilized Agricultural Area	22.5724	0.57	39.88	0.0000	0.7153	1590.74
	const	−109.1060	22.07	−4.95	0.0000
3.	Total Output	0.0085	0.00	25.61	0.0000	0.5089	655.85
	const	35.0033	20.81	1.68	0.0930
4.	Total Inputs	0.0170	0.00	145.40	0.0000	0.9709	21,141.70
	const	−161.0850	16.35	−9.85	0.0000
5.	Farm Net Income	−0.2279	0.01	−31.01	0.0000	0.6031	961.81
	const	5975.2700	340.81	17.53	0.0000
6.	Total Assets	0.0067	0.00	39.71	0.0000	0.7136	1577.21
	const	−807.6240	50.88	−15.87	0.0000
7.	Liabilities	0.0337	0.00	73.66	0.0000	0.8955	5426.19
	const	−94.8496	24.04	−3.95	0.0000
8.	Net worth	0.0105	0.00	83.57	0.0000	0.9169	6984.23
	const	−1199.1100	53.53	−22.40	0.0000
9.	Net Investment	−0.0237	0.02	−1.16	0.2463	0.0021	1.35
	const	1992.1800	273.38	7.29	0.0000
10.	Cash flow	0.0055	0.00	7.99	0.0000	0.0918	63.9835
	const	248.5730	79.64	3.12	0.0019
11.	Subsidies	0.0927	0.00	45.80	0.0000	0.7682	2098.04
	const	−196.0490	25.99	−7.54	0.0000
12.	Net Working Capital	0.0188	0.00	115.80	0.0000	0.9550	13,420.61
	const	−5.2282	18.08	−0.29	0.7727

Dark yellow—the p level below 0.05 and R² above 0.90; medium yellow—the p level below 0.05 and R² below 0.90; light yellow (not occurred)—the p level between 0.05 and 0.10, R² between 0.00 and 0.99. Source: Own study and calculations.

). It can be therefore concluded that the more a farm increases its labour, capital, and assets in agricultural production, the more it will be burdened with taxes.

5. Conclusions and Discussion

To conclude, it is worth mentioning a few reflections on future changes in this situation based on the findings of selected researchers. Rosiński [45] confirms that the agricultural tax paid by farms is more of a property tax with little relation to their income, and its amount depends on the selling price of rye in a given year, decisions of municipal councils regarding tax exemptions or reductions, and on the quality of the soil, which determines a specific conversion factor. After survey research, Wasilewski et al. [46] showed that the agricultural tax could be replaced by a flat-rate tax that takes into account the scale of production determined by the sales volume, as well as the type of agricultural production and its relation to the area of agricultural land. Research conducted by Ganc and Mądra [47] indicates that the new tax should depend on the level of income earned, minus the estimated labour costs of the farmer and his family as well as on the climate and soil conditions and the farm’s agricultural land area. On the basis of simulations, Pieczonka [48] points out that replacing the agricultural tax with income tax on same basis as for persons carrying out economic activities will reduce the income from agricultural activities of farms. This will adversely affect the economic situation of large farms and will improve the economic situation of those which achieve a negative financial result or a profit that is so low that, after applying the system of existing reliefs and deductions, they will consequently pay no tax or will pay less than the agricultural tax.

Jeranyama [1] believes that appropriate and adequate taxation and subsidization of agriculture can act as a lever to support sustainable practices. The public policy framework—including fiscal policy—has a huge impact on the possibilities to implement sustainable practices. Analyzing the systems of agricultural taxation and agricultural accounting in various countries of the world, one can come to the conclusion that in most countries of the world, state budgets subsidize agriculture significantly, because it is believed that a farmer cannot be treated like an ordinary entrepreneur (high opportunity costs) [49]. Tax instruments have a gradual impact on accelerating innovation, structural change and sustainable use of resources [50]. Properly implemented agricultural taxes can effectively reduce pollution and promote sustainable production when properly designed within the Green Deal.

Taxes can support sustainable agricultural production, environmental protection and food security, but their introduction poses risks for producers and consumers. An integrated approach that takes into account economic, environmental and social impacts is key.

The following possible scenarios for the reform of the tax system in agriculture are proposed in Polish literature:

• Inclusion of farmers in the PIT + mandatory accounting (gradually/selectively): The postulate is to first introduce the obligation to keep accounting records and only then consider PIT based on actual income; analyses warn that a simple replacement of agricultural tax with PIT (with a simultaneous increase in KRUS) may increase income inequalities [30,51].
• Mixed system (temporary choice between agricultural tax and PIT), considered as a transitional path: smaller farms remain with agricultural tax; larger ones switch to PIT (full/simplified accounting) [14,30].
• Narrowing the “special” system to small farms + integrating the remaining ones with the general system; introducing income smoothing mechanisms; in many countries, preferences are only for small farms, and farmers are included in the general system with reliefs (e.g., income averaging) [26,51].
• Ecological tax reform (pro-environmental fiscal instruments). Options: taxes/fees on fertilizers and pesticides, water fees, pro-ECO investment relief; review of Scandinavian solutions and Polish environmental tools [51].
• Modification of the agricultural tax structure (updating the base). Context: today, the base is the price of rye × conversion hectares; the literature raises the need to better link the burden with the economic conditions of farms (e.g., greater local flexibility) [45,52].

In addition to the quantitative findings, the perception of the tax system by farmers themselves should also be taken into account. The Polish agricultural tax system is characterized by a significant degree of disarray, a fact clearly reflected in the opinions of farmers themselves. They are particularly critical of two key elements: the lack of stability in tax regulations and the inconsistency of the tax relief and exemption system, which, in its current form, fails to meet the expectations of the agricultural sector. According to them, agriculture should be treated more favorably in income taxation. The main argument is the low profitability of agricultural production [28]. According to farmers, agricultural incomes are lower compared to other social groups, which devalues this sector of the economy [49].

State policy regarding taxes and support for agriculture oscillates between the need to stabilize the sector, adapt to macroeconomic and global conditions (pandemic, war in Ukraine), and the need to ensure food security [49,51,53,54,55]. At the same time, agriculture’s growing dependence on public support and the lack of a coherent and long-term subsidy strategy are noticeable [49].

The debate on agricultural tax reform in Poland has been ongoing for years. The main proposal is to replace the archaic agricultural tax with a more equitable income tax. Although proposed changes have been announced by various governments, they have met with resistance. Farmers often fear that introducing an income tax will lead to an increased financial burden.

The study presented here was carried out by subordinating it to the following research questions:

-

What is the level of farm taxation in the European Union in absolute and relative terms?

-

Which items in farm accounts are affected by taxes paid by the farm?

To answer the first question, data for the entire EU from 2004 to 2022 was collated, and three indicators were shown by country. It turned out that agricultural taxation is increasing, although several countries keep it at a very low level. At the same time, income from agricultural production is growing faster than taxation. EU farms also tend to increase their areas. It can therefore be concluded that agricultural taxes paid by farms in the European Union are individual in nature and dependent on the solutions adopted in a given country.

Taxation of agriculture varies significantly across the European Union [27].

In seeking an answer to question two, the example of Poland was used and compared to the EU average. It was found that taxes have an indirect effect on all production, economic, and financial categories of a farm. In the European Union, they are most closely associated with total production and subsidies, while in Poland they are associated with cost categories (labour input, total costs), equity capital and net working capital.

The article hypothesized that the tax burden on Polish farms is relatively lower than in other EU countries, but it significantly affects farm performance, especially in terms of net income, investment capacity, and asset accumulation.

The notion that Polish farms have a relatively lower tax burden compared to other EU countries. The article shows that the average tax burden on Polish farms increased from €190 per farm in 2004 to €438 per farm in 2022, which is lower than in many EU countries like Belgium, Denmark, or the Netherlands.

However, the tax burden’s impact on farm performance is still noticeable. While Polish farms pay less in taxes, taxes are more closely tied to property ownership rather than income. This property-based tax system does not directly correlate with farm income, meaning that in years of lower yields, farmers still face the tax burden, which could affect their overall profitability and ability to reinvest. Additionally, the study found that taxes in Poland are indirectly linked to financial categories, including labour input, total assets, and net investment. This suggests that taxes may impact investment capacity and asset accumulation over time.

While the tax burden in Poland may be relatively lower, it still plays a significant role in farm performance, particularly in relation to income, investment capacity, and asset accumulation.

These results confirm that in Poland the agricultural tax is more of a tax on property rather than on income, which is consistent with the opinion [45]. It is worth noting that this system differs from the approach adopted in most EU countries, where the tax base is income. In most countries, preferential tax systems are targeted exclusively at small-scale farmers. Poland is an exception, where a special tax system covers almost all farmers, regardless of production scale or farm size [31].

The prevailing view in the literature is that this solution does not encourage farmers to intensify production or undertake any modernization activities and therefore fails to serve as a stimulant. Therefore, agricultural economists argue that a good solution is to replace the current agricultural tax with an income tax [12].

The structure of the agricultural tax in Poland is fiscally ineffective and should be changed. The tax system in Polish agriculture is based on an outdated formula that is incompatible with current economic conditions and, above all, does not take into account the actual financial results of farmers. The agricultural tax fulfils its fiscal function only to a limited extent. It is also a difficult tax to plan and manage [27].

Based on the analysis, three policy recommendations can be formulated:

• Simplification of the tax system—reducing the number of exemptions and exceptions and streamlining procedures for tax settlements to lower transaction costs for farms.
• Linking taxes to income—designing mechanisms to relate the agricultural tax burden to the actual income of farms, which would increase fairness and reduce regressivity.
• Support for small farms—introducing tax reliefs for environmentally friendly investments, local employment or short supply chains, which would strengthen the socio-economic role of smaller farms.

In addition, a good direction would be to introduce mandatory agricultural accounting and the requirement to have cash registers. Introducing such obligations would increase the transparency and professionalization of the agricultural sector, as well as state budget revenues, but it would pose a significant challenge for small farms and could accelerate the concentration of production. This is a step towards the full integration of agriculture into the market economy, but it carries significant social costs.

The Green Deal and the “From Farm to Fork” strategy are becoming a crucial element of the European Union’s agricultural policy. The agricultural tax system can play a significant role in implementing solutions that mitigate the negative environmental impact of agricultural production, as well as in shaping a model of agriculture centred on family farms. The current agricultural tax system is resistant to change, but the Green Deal could provide an opportunity for its reform by introducing fiscal mechanisms that encourage farmers to engage in pro-ecological activities and pro-climate [55].

This study contributes to the literature by filling a gap in research on agricultural taxation in the European Union. Until now, there has been no comprehensive comparative analysis of tax burdens on farms across Member States that combined descriptive indicators with an econometric sensitivity test. By focusing on the Polish case and situating it within the EU framework, the article provides evidence that lower nominal tax levels can still have significant effects when farm incomes are volatile and structurally weaker than in Western Europe.

The findings also have practical implications for agricultural and fiscal policy. They show that tax systems should be evaluated not only by their nominal rates, but also by their interaction with income structures, production conditions, and farm resilience. This perspective is relevant for designing tax instruments that are coherent with the objectives of sustainable agriculture and the EU’s Green Deal, and for ensuring a fair competitive environment between farms across Europe.

Limitations and Future Research Directions of This Study

This research had some limitations, such as reliance on FADN data, simplified treatment of subsidies, and limited econometric specification.

The methodological assumptions and results of research on taxes in agriculture presented here require further thought and testing. They represent a kind of experiment that needs to be confronted with research results from other research centres and encourage other researchers to pursue this topic more frequently.

In the future, the authors would like to analyze farm taxation at the micro level in our research, prepare panel data from various countries taking into account tax burdens adjusted for subsidies, and conduct dynamic modeling of the impact of taxation on long-term investments.

The methodological assumptions and results of research on taxes in agriculture presented here require further thought and testing. They represent a kind of experiment that needs to be confronted with research results from other research centers and encourage other researchers to pursue this topic more frequently.

The adoption of identical solutions regarding agricultural taxation in European Union countries will play a key role. The question is, is this even possible? Since there has been no uniform obligation to keep agricultural accounts on farms for many years, will it be possible to harmonize their taxation throughout the Union? And if the answer is yes, it seems unrealistic in the next five years.

In conclusion, the EU’s agricultural tax systems have not only a fiscal role, but also a regulatory and supportive one. Their diversity represents a challenge but also an opportunity to adapt policies to local circumstances, while striving for cohesion and competitiveness of the whole sector in the European market.

These comparisons demonstrate that while our study confirms some of the established patterns in the literature, it also provides a novel perspective by linking categorization with estimation results. Future research should explore integrating our approach with longitudinal models to further assess convergence or divergence trends within the EU.