Poland’s government has unveiled further measures intended to soften the blow of rising inflation, which is at its highest level in over two decades and among the highest in the European Union.
The latest “anti-inflation shield”, which will come into force in February, will include cutting VAT on food, gas and fertiliser to zero. It is estimated to cost the budget between 15 and 20 billion zloty (€3.3-4.4 billion).
It follows a previous package of measures worth up to 10 billion zloty announced in November, which included reduction in the excise tax on fuel, lower VAT on gas and electricity, as well as a special allowance for around five million households.
Annual inflation in Poland rose to 8.6% in December, according to preliminary figures released today by Statistics Poland (GUS), a state agency. That marked the sixth consecutive monthly rise, and is the highest figure since November 2000.
The growing costs of fuel and food continue to be the main drivers of price rises. In response, the government has sought approval from the European Union to scrap the current 5% VAT on food, and yesterday it announced that it would proceed with that plan.
“This will be the effect which the state budget will shoulder,” said Prime Minister Mateusz Morawiecki. The measures will be in place until the end of July, when, according to central bank forecasts, inflation will begin tailing off after a peak in June.
Morawiecki also appealed to businesses selling food to lower their retail prices to reflect the temporary tax drop from 1 February.
He called on people to check that retailers were not pocketing the difference, but said that retail inspectors and the anti-trust authority would also be authorised to monitor prices.
As retail prices for both petrol and diesel have recently hit their highest level for years in Poland, the government has also pledged to lower tax from 23% to 8% at the start of the next month.
“This will be a fundamental price change,” said Morawiecki, predicting that in three or four weeks prices of petrol, oil and diesel could drop by 0.60-0.70 zloty (€0.13-0.15) per litre at stations.
Meanwhile, VAT on gas – which has already been lowered from 23% to 8% – will also be cut to zero in an effort to counter the steep rise in energy prices. At the start of this year, average household bills for gas jumped 54% and for electricity by 24%.
VAT on fertilisers – the price of which has risen with that of gas – will also be cut to zero in an effort to decrease pressure on food prices.
While the government has been criticised by the opposition for rising prices, the prime minister yesterday sought to deflect the blame. He said that 80% of the influence on prices is “external”, including “Russian gas manipulation” and “irresponsible, dogmatic EU climate policy“.
“The EU climate policy is responsible for more than half of the price of electricity,” said Morawiecki yesterday. “This is the truth. Every Pole has the right to know the truth.”
The prime minister also announced that the previous “anti-inflation shield”, announced in November, will be extended from the planned four months to six. Morawiecki estimated that, as a result of the combined measures, households would on average save 100 zloty (€22) per month.
🛡️ Obniżamy podatki dla wszystkich ⤵️
✅ zmniejszamy presję inflacyjną w sytuacji powszechnego wzrostu cen w UE i kryzysu energetycznego.#TarczaAntyinflacyjna 2.0 pic.twitter.com/AOSjsfrHyu— Kancelaria Premiera (@PremierRP) January 11, 2022
Main image credit: Krystian Maj/KPRM (under CC BY 3.0 PL)
Maria Wilczek is deputy editor of Notes from Poland. She is a regular writer for The Times, The Economist and Al Jazeera English, and has also featured in Foreign Policy, Politico Europe, The Spectator and Gazeta Wyborcza.
