The Polish government’s anti-inflation shield will remain in place, but changes will be made to it, Mateusz Morawiecki, Poland’s prime minister told a press conference on Monday.
The shield, which introduced a number of VAT cuts on food and fuel, was first brought in at the end of 2021 to combat rising inflation but in its present form has failed to get the approval of the European Union. Under the shield, VAT on food products was cut to zero per cent from the standard 5-per cent rate, while VAT on fuels went down to 8 per cent from the standard level of 23 per cent.
“We have received warnings from the European Commission that penalties will be imposed if we do not withdraw from the protective measures taken so far, the reduction of VAT rates,” said the prime minister.
“We want to replace them with other defence mechanisms against inflation in order to maintain the price freezes for households… as well as those for small and medium-sized enterprises, hospitals and schools.”
Morawiecki said that this would be possible through the shaping of energy prices so that they would create a financial cushion when VAT rates return to their previous level.
Poland wants to avoid another conflict with the European Union, the prime minister added.
“For as long as it is possible and as long as there is no vehement opposition from the European Commission, we will maintain zero VAT rates on food,” he said. “This will skew competition on the single market to a much lesser extent and translate, above all, into slightly lower prices for Polish families.”
He pointed out that Poland would try to ensure that, at least, these VAT reductions would be maintained and that others would be amortised through different mechanisms.
“The anti-inflationary shield remains, only in a changed form,” concluded Morawiecki.