Polish government preparing second anti-inflation shield

According to the prime minister, the inflation rate in Poland should not exceed 10 percent. Radek Pietruszka/PAP

Details on a second package of tax reductions to soften the blow of inflation in Poland should be released next week, Mateusz Morawiecki, the prime minister, has said.

The government rolled out its first anti-inflation shield at the end of 2021 to combat Poland's rising inflation rate.

Poland's Central Statistical Office (GUS) reported in a flash estimate on Friday that the prices of consumer goods and services (Consumer Price Index, CPI) had increased by 8.6 percent year on year in December.

In an interview with the Interia portal, Morawiecki said that, next week, the government would inform the public "if and when" the anti-inflation shield "2.0" would be introduced.

"We are still working out the details and estimate that the cost of the second package of tax reductions could range from PLN 6 billion-7 billion (EUR 1.3 billion-1.5 billion)," he continued.

The head of the Polish government stressed that once inflation starts to fall "the tax rates will gradually return to their usual levels." He added, however, that temporary tax cuts during high inflation are "very important to Polish families."

According to the prime minister, the inflation rate in Poland should not exceed 10 percent.

"We have to remember, however, that exceeding 8 percent is already alarming," said Morawiecki. "Economists estimate that our (first) package has reduced the inflation peak by 1.5 percentage points. With the second package, we would bring down the inflation expectations, a main driver for future inflation."

The original shield included a reduction of excise duties on fuel, along with a temporary exemption from retail sales tax for fuel.

The government is also awaiting EU approval for a temporary VAT-scrap on selected foods.

On Friday, Piotr Mueller, the government's spokeperson, told PAP that "the 'anti-inflation shield 2.0' would be the subject of the cabinet's meeting on Tuesday," and that it would be followed by a press conference that would reveal its details.