Food VAT returns to Poland as new government pivots on inflation policy

After a year-long reprieve, a 5% value-added tax (VAT) on essential food items is returning to Poland under the new left-wing government led by Prime Minister Donald Tusk. The previous conservative administration had implemented a zero VAT rate in February 2022 to help citizens cope with high inflation, which peaked at 9.2% year-over-year.

Morawiecki, whose Law and Justice (PiS) party introduced the zero food VAT, argues that it was highly effective in mitigating the impact of inflation and that its elimination contradicts the promises of the new government. He cautioned about looming challenges such as higher energy costs this autumn and increased fees for entrepreneurs.

Economists predict that the VAT reinstatement will result in higher prices for items previously exempt, including meat, fish, dairy, eggs, produce, fats, ice cream, and water. Interestingly, while food is being taxed again, the new government has reduced VAT on beauty services following lobbying efforts by the industry before the election.

With local elections scheduled for April 7, Morawiecki stated that this will be the first opportunity to assess the government's policies. As Poland navigates post-pandemic economic recovery, the decision to reinstate the food VAT highlights the delicate balance between controlling inflation and providing relief for the cost of living.