Poland promises 2016 VAT rate cut

Wed 16th Apr 2014

As Poland makes progress on bringing its budget deficit under control, the government has stated its aim to reduce the current Polish VAT rate by 2016. The standard Polish VAT rate was increased to 23% in January 2011 as part of an attempt to cope with the financial crisis.

Polish economy slowly 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%, and raise its reduced VAT rate to 8%. Poland’s deficit hit 10% of its Gross Domestic Product in 2010.

The 2014 deficit is still on course to hit 4.3%, meaning plans to return the rate to 22% will be delayed. But continuing spending cuts should bring the deficit down to 3% in 2015. This is part of the European Union’s excessive deficit procedure. This will see Poland reach a deficit of 2.5% by 2015.