Higher VAT is to stay for longer. The government is working on extending the increased rates in 2011

On Thursday, the Sejm received a government bill amending the act on corporate income tax and certain other acts. “The draft in question assumes the continuation of the application of VAT rates increased by 1 percentage point in 2023 due to the planned a jump in defense spending“- it was written in the explanatory memorandum.

The justification stated that the changes proposed to the VAT Act provide for the introduction of a new mechanism from 2024, based on which the period of validity, increased by 1 percentage point, will be extended. VAT rates. “This mechanism has been correlated with the level of expenditure allocated to the financing of the defense needs of the Republic of Poland,” we read.

The authors of the draft explained that the increased rates VAT are to be applied on the basis of a new mechanism from January 1, 2024 until the end of the year, in which the sum of defense expenditure defined in the project, after excluding the planned financial flows from this total expenditure, will be higher than 3%. Gross Domestic Product (GDP).

The proposed changes are to enter into force on October 30, 2022.

According to “DGP”, the act on tax on goods and services describes the conditions for maintaining higher VAT rates. They concern, inter alia, the method of calculation public debt in relation to GDP or cumulative deficit in the state budget. According to Sławomir Dudek, chief economist of the Civic Development Forum foundation and former director of the macroeconomic policy department at the Ministry of Finance, “from 2023 the conditions set out in the VAT Act are met to return to the 22 percent rate.”

As noted by “DGP”, this means that without changing the regulations next year, the basic VAT rates from the vending machine should drop to the level before the 2011 increase.

VAT rates were increased by 1 percentage point in 2011 by the government of the coalition of the Civic Platform and the Polish People’s Party. It was announced then that the increase in VAT rates to 8 percent. and 23 percent it is temporary, but it was maintained in the following years. It is to be similar next year. “DGP” points out that the government of the United Right is already working on changing the law.

the Council of Ministers this week, it adopted a bill extending, inter alia, operation of the anti-inflationary shield until the end of 2022, it stipulates that the current VAT rates will remain at 23 percent. and 8 percent The daily notes that as the justification for maintaining the current rates in 2023, the government indicated “the armed conflict in Ukraine and the necessity to incur increased expenses by the state budget.”

Similar explanations are also presented by the Ministry of Finance.

“Explosion wars in Ukraine and the related threats posed new challenges for the state’s fiscal policy. This is directly related to the obligation to increase funding for security and defense. It is important, while maintaining the stability of public finances, that the state undertakes quick and adequate measures to minimize the risks associated with the current geopolitical situation, as well as the effects of inflation, growing mainly due to the destabilization of commodity prices, “he explains. Ministry of Financequoted by the journal.

According to the information from “DGP”, the basic variant assumes that a new, binding VAT rates with “above-average” defense expenditure will be added to the conditions contained in the act. – A third condition may be introduced, that as long as we spend any amount on defense, the rates remain at the current level – a government person says in an interview with the newspaper.

Sławomir Dudek criticizes this approach. – You might as well enter the condition that we maintain the current VAT rates until Polish astronauts land on Mars – says “DGP”.

Another interlocutor of the journal did not rule out simpler methods. – There was indeed an idea to link it with defense, but you can also extend the validity of the current VAT rates by changing the period in which they are legally binding, or change the indicators that may force such a reduction – says the “DGP” informant, noting that not for the first time. is happening. – It would actually be another extension. This should already be included in the prepared budget assumptions for 2023 – he adds.

The government’s interlocutors also point to the need to maintain the anti-inflationary shield as a reason for maintaining the increased basic VAT rates.

“Moreover, our PiS interlocutors argue that until the elections, i.e. by the autumn of 2023, no one would dare to withdraw from the shield so as not to irritate the voters. If the shield were to be in force throughout the next year, it would cost the budget 33 , 4 billion zlotys “- writes” DGP “.