The VAT reductions are an element of the so-called anti-inflation shield 2.0 whose acceptance by the government was announced by Prime Minister Mateusz Morawiecki on Tuesday. “The shield” foresees a total reduction of VAT for food, fertilizers and gas; a reduction to 5 percent for heating and a reduction down to 8 percent for fuels.
An amendment to the Value Added Tax law filed by Law and Justice (PiS) MPs has already reached parliament. According to the draft bill, the lower VAT rates are meant to be enacted between Feb. 1 and July 31, 2022.
Food and drinks, which currently have a 5 percent VAT, will drop down to zero.
Morawiecki estimated the reduction of VAT on food would cost the state budget from PLN 6 billion to PLN 7 billion (€1.3 billion to €1.5 billion).
“I call on all food traders to reduce prices accordingly,” Morawiecki said, predicting that food prices should go down next month.
Tax on engine fuels will be decreased to 8 percent from 23 percent. Tax on fertilizers will be reduced from 8 percent to 0. The VAT on natural gas will be reduced from 8 percent to 0 and from 8 percent to 5 percent for heating. In the case of electric energy, the current already lowered VAT of 5 percent will be maintained.
Morawiecki said that new tax rules under his government’s Polish New initiative, coupled with the latest anti-inflation measures, would “positively affect the budgets of Polish families.”
Morawiecki estimated that reduced VAT on food would bring Polish households an additional PLN 45 (€9.90) in savings a month, while all the new anti-inflation measures combined would leave them with an extra PLN 100 (€ 22) to spend a month.
The total decrease in income in the state budget has been estimated to be around €2.56 billion.