Poland to Slash Levies to Curb Inflation and Ire Over Taxes

Poland to Slash Levies to Curb Inflation and Ire Over Tax Revamp

Piotr Skolimowski

11 Jan 2022, 09:09 PM IST

(Bloomberg) -- Poland’s government vowed to slash levies on everything from food to fuel to rein in the highest inflation in more than two decades and manage anger over a botched tax overhaul that has left some workers poorer.

In his cabinet’s second anti-inflation package in as many months, Prime Minister Mateusz Morawiecki said the government will temporary reduce value-added tax on gasoline and scrap it on basic foods, fertilizer and natural gas starting from February. He also urged retailers to respond by reducing prices and asked Poles to “watch out” for shops that don’t.

“Most Poles can’t sleep because of rising bills,” Morawiecki told a news conference on Tuesday. “It is known that inflation was caused by external factors, but we have to find the answer and bear the price.”

The New Anti-Inflationary Plan:
VAT on staple foods will be scrapped to 0% through July For gasoline it will drop to 8% from 23% through July Natural gas VAT will fall to 8% from 23% in January and from 8% to 0% from February Reduction in VAT on electricity to 5% will be extended until end-July VAT on heating will be cut to 5% On fertilizers VAT will drop to 0% from 8%

The tax cuts will stay in place for six months and could cost this year’s budget as much as 20 billion zloty ($5 billion), he said.

The prime minister’s nationalist ruling party has blamed the surge in inflation on the European Union’s “dogmatic” policy of shifting to cleaner sources of energy and smaller gas deliveries from Russia.

Tax Chaos

The cabinet is introducing the new measures in the face of growing anger over the rollout of a flagship tax revamp aimed at increasing the take-home pay of lower earners -- and the flagging support for the ruling Law & Justice party -- before next year’s elections.

The government has said complex changes, dubbed the “Polish New Deal,” will benefit 18 million Poles, leaving them with 17 billion more zloty to spend.

Instead, the plan has been marred by errors, leaving some teachers and pensioners with lower salaries in January than the year before.

The government has rushed to clarify the changes with stopgap regulations that have created more confusion. In a letter sent to prime minister last week, the tax offices’ trade unions said they’re not able to properly advise citizens about the tax changes when the officials “aren’t convinced about how to interpret them and what their final shape will be.”

Morawiecki apologized for the chaos caused by the tax plan on Tuesday and said Poles will see a positive impact on their incomes in the coming months.