Poland announces tax cuts to ease inflationary pressures Reuters

© Reuters. File photo: People visit the shopping center, which reopened after the relaxation of coronavirus disease (COVID-19) restrictions in Gdansk, Poland on February 1, 2021. Bartosz Banka/Agencja Gazeta via Reuters

Warsaw (Reuters)-The Polish Prime Minister said on Thursday that Poland will cut taxes on gasoline, natural gas and electricity and provide cash payments to households in a plan worth up to 10 billion zlotys (US$2.4 billion). Helping people cope with high inflation.

Poland is the largest economy among emerging European countries, and its inflation rate has reached the highest level in 20 years. This has led to tight household budgets and aroused concerns from the government, which touts its generous social welfare and raising the minimum wage to increase the spending power of ordinary citizens.

“The Polish government is taking action… to soften and cushion this increase in inflation,” Mateus Morawiecki said at a press conference.

He said that within five months from December 20, the gasoline tax will be reduced to the lowest level allowed by the European Union.

From January to March, the value-added tax (VAT) for natural gas will be reduced from 23% to 8%. The electricity value-added tax in the first three months of 2022 will be reduced from 23% to 5%. There is no consumption tax on household electricity.

In addition, the family will receive financial support in the form of a means survey payment of 400 to 1,150 zlotys, which will be paid in two installments in 2022.

Rafal Benecki, chief economist of ING Poland, said that the plan will temporarily reduce the CPI, which means its peak is lower, but the payments to households will be combined with the announced tax cuts and an increase in the minimum wage to stimulate consumer demand.

He said: “I think this will lead to a decrease in the inflation rate at the beginning of the year and an increase in the inflation rate at the end of the year.”

Central and Eastern European countries have the highest inflation rates on the African continent due to tight labor markets and a strong rebound from the COVID-19 pandemic, coupled with global factors such as rising energy prices and supply chain disruptions.

According to the CBOS poll released on Tuesday, public criticism of the government’s economic policies is deepening, with 57% of respondents saying that they do not think the economic situation has a chance to improve.

(1 USD = 4.1589 zloty)

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