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Friday, May 24, 2024

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VAT reduction on food to be lifted

Poland’s government will end 0% VAT on food introduced two years ago to help soften the blow of soaring inflation. The finance ministry said the recent slowing of price rises renders the measure no longer necessary.

“Due to the latest inflation readings and forecasts of prices of basic food products subject to the transitional 0% VAT rate, the finance ministry has decided not to extend the temporary reduction of the VAT rate after 31 March 2024,” the ministry said. It noted that, when the measure was introduced in February 2022, annual inflation had reached 9.2% the previous month. Inflation then soared to a peak of 18.4% in February 2023, but has been in decline since then.In January this year, it fell to 3.9%, the first time it had been below 4% in almost three years. Food and drink prices rose 4.9% year-on-year in January, the lowest figure since September 2021.

The finance ministry notes that food price growth and overall inflation are set to continue to slow in the data for February and March, thereby justifying the return to the previous 5% VAT rate on food from the start of April. “From 1 April, the zero VAT rate on food will disappear, and unfortunately this isn’t an April Fool’s joke,” tweeted Mateusz Morawiecki, who as PiS prime minister introduced the 0% rate in 2022. “The government is again draining Poles’ wallets.” When the outgoing PiS government renewed the 0% VAT rate in December, the finance ministry estimated that the policy would cost the state budget 2.93 billion zlotys (€684 million) in lost tax revenue across the whole of 2024.

Jo Harper
Jo Harper
Jo Harper is a British national with a 20-year freelance journalistic career in Poland, Germany and the UK, writing for Deutsche Welle, Politico, the BBC, the Daily Mirror, Gazeta Wyborcza, Polityka, New Eastern Europe and Forbes. He is a published author of books on Polish affairs and holds a PhD from the London School of Economics.
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