It is clear that the ruling coalition of PO, Third Road and Left has chosen a policy path that ends the zero VAT rate on food and stops price freezes for electricity, gas, and district heating in cities. At the same time, it plans to cut the VAT on certain beauty services, signaling a selective tax relief for an industry used by many households.
The fading of price protection
Starting on April 1, the zero VAT rate on food, introduced by the previous government under Prime Minister Morawiecki, will expire. This will allow food prices to rise. On June 30, the price freeze for electricity, gas, and district heating ends as well, which is expected to push up energy costs for households and businesses. Concurrently, the VAT for beauty services will drop from 23% to 8%, a move that could lead to lower prices for eyebrow and eyelash treatments. The governing plan appears to accept higher costs for essentials like food and energy while easing the tax burden for a sector that is widely used by residents, though not consistently so.
It is important to recall that the zero VAT rate on food was in effect from February 1, 2022, as a response to price pressures from the Covid era. It was renewed several times, and after forming a new majority in the Sejm, Prime Minister Morawiecki extended it again, this time only through the first quarter of 2024. Maintaining the zero VAT rate for food is argued to be necessary for at least two reasons: removing it could trigger price increases well above 5% (as the VAT would rise from 0% to 5%), which would affect lower-income households and potentially spark new inflationary pressures. Given that food spending makes up a substantial share of household budgets, changes to VAT on food have a pronounced impact on consumers with tighter finances.
Budgetary pressures on the beauty industry
As noted, the party-led government will not extend the price freeze for energy carriers beyond July 1 this year; electricity and other energy prices are expected to climb sharply. For households consuming up to 1.5 MWh, electricity costs in the first half of the year will be roughly PLN 0.90 per 1 MWh gross. If the subsidy system is removed from July 1, prices may rise to around PLN 1.9 per 1 MWh gross. This would amount to more than a doubling, with broader inflationary effects as energy is a key input in the production of many goods and services.
Meanwhile, during the campaign, the leader of the Platform promised to cut the VAT on beauty services from 23% to 8%. With this pledge in mind, the Finance Minister prepared relevant regulations. The ministry contends that reducing VAT for this sector would cost the state budget more than PLN 200 million annually and total at least PLN 2.2 billion over the next decade, through 2033.
Potential dissatisfaction from industry groups
Business representatives have shown concern that the proposed adjustments address only a portion of services categorized by the PKD system, and they have urged broader tax relief for all service types. Expanding relief would raise costs for the public purse, which is likely why the government chose a narrower proposal. This could lead to friction with industry groups that remain vocal and well organized, wielding considerable influence over policy discussions.
Regardless of the outcome, the situation illustrates the coalition’s approach to governance: support higher VAT on food and energy, while offering targeted VAT relief in the beauty sector. The intent appears to balance broader price stability with political commitments made during the campaign, even as many Poles face significant, sustained price pressures in daily life.
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Source: wPolityce