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Poland likely to extend inflation VAT cuts

Warsaw government considering rolling over VAT cuts

Mateusz Morawiecki, Poland’s prime minister, has confirmed Poland is likely to rollover a number of temporary VAT rate cuts as inflation hit 12.3% in April 2022 (March, 10.9%). This is the highest rate since 1998.

The current cuts, see below, are due to expire on 31 July 2022. European inflation VAT cuts have become popular across the region as inflation hits forty-year highs.

February 2022 cuts

On 20 January 2022, the Polish Parliament voted to add further goods to the list to enjoy VAT rates cuts to 8% from 1 February 2022. These include:

  • Coal and coke
  • Heating diesel
  • Diesel fuel
  • LPG gas for heating

This follows agreement to cut VAT on basic foods to zero.

Inflation Shield 2.0: fears following Jan 2022 VAT cut to domestic energy VAT lead to plan to petrol / gas rate to 8%

As Polish inflation hit 8.6% in December 2021, the government won Parliamentary approval (Sejm lower house) to reduce the VAT rate on automobile petrol from 23% to 8% from February until 31 July 2022. This will cost ZL 3bn (approx €600k) for the planned six months. Aside from the cut to domestic power (see below), Poland will cut food VAT from 1 February till 31 July 2022.

Feb 2022 Domestic energy Value Added Tax rate reduced from 23% to combat record inflation

Poland has joined the growing list of countries that have cut VAT on domestic power to help consumers as wholesale prices continue to spike. The following rates will apply between 1 February and 31 July 2022:

  • Extension of electricity reduction from the 23% standard rate to the reduced rate of 5% and no excise charges; and
  • Natural gas will drop from 23% to 8% reduced rate between February and July 2022. It had previously been at 5% reduced as a temporary measure.
  • Thermal energy heating will be cut from 8% to 5%
  • Fuel 8%
  • Fertiliser cut to 0%

There will also be a cut in excise duties on fuels. Basic foodstuffs are reduced to 0% over the same period.

Polish coal demand has risen this year due to poor wind conditions and increased power demand, while record gas prices also saw Poland swing from net imports to net exports of electricity, with coal-fired generation costs falling below gas-fired generation costs across Europe.

Polish inflation rocketed 8.6% last month with the public concerned about rising costs of food, gas and power. Tight labour markets following the opening of the economy post-COVID crisis have added to price pressures.

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