Poland offers tax-cut package to ease inflation

Leszek Szymanski/PAP

The Polish government will introduce a package of tax cuts, including reduction of excise on fuels and electricity, to mitigate the effects of inflation driven up by high gas and electricity costs.

Poland's inflation has been rising throughout the year and has recently approached 7 percent, far above the central bank's official target of 2.5 percent.

"Today we are implementing the anti-inflation shield... a large programme of tax cuts that will benefit people and alleviate the effects of inflation," Prime Minister Mateusz Morawiecki told a press conference on Thursday. He added that the programme is worth up to PLN 10 billion (EUR 2.14 billion).

As part of the anti-inflation shield, Poland will decrease VAT on electricity to 5 percent and on gas to 8 percent from the current 23 percent, for three months starting January 1, he said.

The excise tax on electricity will be abolished for households and reduced for other users to the minimum level allowed in the EU.

The government also plans to reduce excise tax on fuels to the minimum level allowed in the EU for five months starting on December 20, and exempt fuels from retail tax and emission fees for five months starting January 1.

According to Morawecki, thanks to these cuts, Polish households will enjoy around a PLN 140 (EUR 30) average quarterly decline in gas costs. The government hopes to bring the retail fuel price down by PLN 0.2-0.3 per liter (EUR 0.043 - EUR 0.064).

Additionally, around 5.2 million Polish households will receive financial support in the form of a PLN 400-1,150 (EUR 86-246) subsidy based on income criteria, to be paid out in two instalments in 2022, to help Poles offset energy price hikes.

Morawiecki said that in order to make room for spending related to the anti-inflation shield, the government will seek savings in public administration and increase efficiency of state spending.