Poland drops VAT cut to 22%

Tue 8th Dec 2015

Poland has quietly dropped plans to cut its standard VAT rate from 23% to 22% from 1 January 2016. The change of policy comes following the recent change in government to the Justice Party, and concerns about the continued growth of the country.

Summer plans to cut VAT

On 8th July 2015, Poland’s government announced  plans to cut the standard Polish VAT rate from 23% to 22% from 1 January 2016.  The decision to bring forward the cut came about as Poland left the EU’s excessive budget deficit procedure recently.  The cut will cost around €1.5 billion per annum.

Polish economy recovering

Poland has had a relatively good financial crisis, and was the only economy not to go into recession. Nevertheless, since it had signed-up to the Euro currency convergence criteria, it was required to keep its budget deficit below 3% of its GDP. As the European markets slowed following the 2007/8 credit crunch, this forced Poland to raise its VAT rate from 22% to 23% in 2010, and raise its reduced VAT rate to 8%. Poland’s deficit hit 10% of its Gross Domestic Product in 2010.

The latest deficit forecasts show that it can reach the Euro entry criteria comfortably.