Polish PM presents details of anti-inflation package

We are proposing a large programme of tax cuts to mitigate the effects of inflation, Prime Minister Mateusz Morawiecki announced, giving details of the so-called anti-inflation shield.

He said that from December 20 a reduction in fuel prices would be introduced for five months. Moreover, in 2022 the amount of excise duty will be reduced to the lowest level allowed in the EU, a VAT tax cut for gas will be introduced, zero excise duty on electricity for households and a special allowance for low earning households.

The head of the government pointed out that inflation is a consequence of the COVID-19 pandemic, and more specifically the consequence of aid packages and the fact that economies are recovering from the COVID-19 pandemic.

He said that the government “had a dilemma whether to allow unemployment to increase to 1.5 - 2 million, or whether to protect jobs. We decided to protect jobs and that is why we invested PLN 200 billion [EUR 42.80] in the economy”.

A VAT reduction on natural gas from 23 to 8 percent will be one of the first introduced measures. Also a reduction in fuel prices would be introduced.

“From December 20, for five months, we are implementing a reduction in fuel prices with the mechanisms the state has available. First of all, the amount of excise duty will be reduced to the minimum level allowed in the EU. Second, from January 1 to May 31 for five months, fuel will be exempt from the retail sales tax. We will also release the emission fee for five months,” The Prime Minister said.

This will lead to a reduction in fuel prices in the next few weeks, amounting to a decrease of PLN 0.20 to 0.30.

Furthermore, the creation of new, previously unplanned government jobs or offices will be limited. If there is a need to strengthen the staff, it will be done on a part-time basis. The government also intends to review all public spending in terms of its effectiveness.

The prime minister also informed that from January 2022 the VAT rate on electricity would be reduced for three months.

In total, all these active measures will result in a package amounting to PLN 10 billion (EUR 2.14 bn), the head of the government said.

In addition a protective and compensatory supplement will be introduced in order to directly support families. This compensatory allowance is related to, inter alia, rising food prices.

This special allowance “will be worth from PLN 400 (EUR 85.61) to even over PLN 1,000 (EUR 214.06) depending on the household,” Prime Minister Morawiecki stressed.

He emphasised that over 5 million households will benefit from this allowance. “A significant part of households will be able to at least partially offset the costs of inflation, which we imported, unfortunately, on the one hand, due to high gas prices from Russia, and on the other hand, due to high energy prices and the EU climate policy,” the Polish Prime Minister concluded.