It is already clear that the ruling coalition of PO, Third Road and Left has made the political decision that there will be no continuation of the zero VAT rate on food, and that there will be no freeze on prices for electricity, gas and district heating will come. (heating in cities), but there will be a reduction in the VAT rate for eyebrow or eyelash correction.**
The twilight of price freezes
On April 1, the zero VAT rate on food scheme introduced by Prime Minister Morawiecki’s government will expire, meaning price increases for food products, while on June 30 the freeze on prices for electricity, gas and district heating will end, meaning major increases . in the prices of these media energy, and from April 1, VAT rates for the beauty industry will be reduced from 23%. at 8 percent, which likely means price reductions for these types of services. Therefore, the current majority government’s governing plan is such that it agrees to increases in food and energy prices that apply to all Poles and at the same time is willing to reduce the tax burden on an industry whose services are used by citizens. rather sporadically.
Let’s not forget that the zero rate on food was in effect from February 1, 2022 and was in response to the price increases caused by the Covid pandemic. It was extended several times, Prime Minister Morawiecki, after forming a new majority in the Sejm, decided in early December last year to extend it, this time only for the first quarter of 2024. Maintaining the zero VAT rate on food is necessary for at least two reasons: abandoning it will result in an increase in prices by much more than 5% (the VAT rate will be increased from 0% to 5%), which will affect less wealthy households, and is likely to trigger a new inflationary impulse. And since food expenditure in the structure of household expenditure in Poland averaged over 27% in 2023, food price increases were driven by a return to 5%. VAT rates will be particularly strongly influenced by less affluent consumers.
Expensive for the beauty industry budget
As I said, the Tusk government no longer plans to ‘freeze’ the prices of energy carriers (electricity, gas and district heating) from July 1 this year; in this situation, their prices will increase dramatically, especially electricity prices. For all households consuming no more than 1.5 MWh, electricity prices in the first half of this year will be approximately PLN 0.90 per 1 MWh gross. Due to the still functioning subsidy system, if they are stopped from July 1, they could be at the level of approximately PLN 1.9 gross per 1 MWh. This means that they will increase by more than 100 percent, electricity prices for entrepreneurs will also increase significantly, and since energy is included in the production cost of any product or service, this means a strong inflationary impulse throughout the economy.
In turn, due to the fact that during the election campaign, the chairman of the Platform, Donald Tusk, at meetings with representatives of the beauty industry, promised that the VAT rate on his services would be reduced from the current 23%. to 8%, and they now demand that this declaration be met, the Minister of Finance has drawn up appropriate regulations. He claims that reducing the VAT rate for this sector will cost more than PLN 200 million annually, and will cost the budget at least PLN 2.2 billion over the next ten years, until 2033.
They will be dissatisfied either way
Business representatives reacted nervously to the minister’s proposal, pointing out that his proposals included only about half of the services provided in offices (according to the PKD classification), and demanding a reduction in tax rates for all types of services . However, this would entail much higher costs for the state budget and that is probably why the Minister of Finance decided on a limited proposal, probably not realizing that this would cause a serious conflict with representatives of this sector, who are very involved appear to be. well organized and have a lot of influence.
Regardless of how this conflict is ultimately resolved and whether beauty industry representatives believe that Prime Minister Tusk has fulfilled his election promise to this environment, this case clearly demonstrates the governance plan of the Platform and its coalition partners. We agree to an increase in the VAT rate on food, although expenditure for this purpose represents on average more than a quarter of the total expenditure of each Polish family. We also agree to significant increases in the prices of electricity, gas and heating in cities, but at the same time we will reduce VAT rates on services in the beauty industry, which most Poles use only occasionally.
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Source: wPolityce