Polish government to withdraw anti-inflation measures due to “threats from EU”

Poland’s prime minister, Mateusz Morawiecki, has confirmed that his government will withdraw some of its measures designed to soften the impact of inflation on households and businesses.

He says the decision is being made due to “threats from the EU” because Poland has cut VAT rates too far. However, the newspaper that first reported the news says that the government may actually welcome being able to end the expensive measures while blaming Brussels for the decision.

This morning, Dziennik Gazeta Prawna (DGP), a leading daily, reported – based on anonymous inside sources – that the government was considering withdrawing parts of its so-called “anti-inflation shield”.

It said that the European Commission had already communicated in writing doubts to Warsaw about measures relating to reducing VAT on natural gas, motor fuels and fertilisers. EU directives do not allow for such low rates, notes the newspaper, though so far Brussels has “turned a blind eye”.

“Paradoxically, the commission’s actions may be of use to the government…[which] will be able to say that Brussels is to blame if a decision is made to withdraw from the [anti-inflation] shield,” wrote DGP. The shield will cost 30.6 billion zloty (€6.5 billion) this year and even more in 2022.

Asked by the press about DGP’s report during a visit to a bakery, Morawiecki confirmed that the anti-inflation shield “will take on a new form due to a lack of consent on the part of the European Commission”, reports the Polish Press Agency (PAP).

“We even have threats from the European Commission that penalties will be imposed if we do not withdraw from the previous protective measures, the reduction in VAT rates,” continued the prime minister.

However, he said that the government would seek to “replace the shield with a different mechanism of defence against inflation…so that price freezes for businesses and households are maintained”. This would include “shaping energy firms’ prices so that they form a buffer against the return of VAT to the previous level”.

“As long as is possible – and there is no vehement opposition from the European Commission – we will maintain zero VAT rates on food,” he added. “After all, this disrupts the competitiveness of the single market to a much lesser extent, and above all translates into slightly lower prices for Polish families.”

While member states are allowed to set their own VAT rates, EU rules stipulate that the standard rate cannot be less than 15% while a reduced rate of 5% can be applied to certain goods and services.

As inflation began to rise sharply last year, Poland’s government introduced measures in November 2021 to soften the blow of rising costs. That included lowering VAT on gas and electricity.

The following month, Morawiecki urged the EU to allow further cuts on VAT for fuel and food. In January this year, his government then cut VAT on food, gas and fertiliser to zero. Since then, inflation has risen even further, reaching almost 18% last month, the highest level since 1996.

Main image credit: Krystian Maj/KPRM (under CC BY-NC-ND 3.0 PL)

Daniel Tilles

Daniel Tilles is editor-in-chief of Notes from Poland. He has written on Polish affairs for a wide range of publications, including Foreign Policy, POLITICO Europe, EUobserver and Dziennik Gazeta Prawna.