Poland has announced it is to embark upon a temporary tax-cutting reform to help battle against rising inflation.
Last month, Poland’s statistical office GUS reported yet another rise in inflation. Polish CPI accelerated by 0.9pp to 6.8%on a yearly basis in October, the highest it has been since May 2001.
Poland announced on Thursday that it will temporarily reduce taxes on electricity and gas as well as the excise on fuel to help negate the impact of consumer prices that have soared to a two-decade high.
Value-added tax (VAT) on gas will be cut to 8% from 23% from January to March. VAT on electricity in the first quarter of 2022 will fall to 5% from 23%. There will also be no excise duty at all on electricity for households.
Poland, the largest economy of emerging European countries, will give up 10 billion zloty ($2.4 billion) in revenue from value-added tax.
Additionally, Polish households will receive financial support in the form of means-tested payments of 400 to 1,150 zlotys, which will be made in two installments in 2022.
Poland Struggling With Rising Inflation
Whilst most nations are gearing up for raises in the inflation rates, annual inflation has become a major source of concern for Polish consumers as well as a hot political topic. The Polish government is intervening to help boost the efforts of the country’s central bank – the Narodowy Bank Polski. The NBP raised the key interest rate by 115 basis points to 1.25% over the last two months.
Deputy Prime Minister Jacek Sasin said to reporters after the tax cuts were announced:
“We’re responding to market challenges, to energy prices, which went wild on global markets,”
Meanwhile, Rafal Benecki, chief economist at ING in Poland commented on the tax cuts, saying:
“I think the impact of this is lower inflation at the beginning of the year and higher inflation at the end of the year,”
