Fuel Prices May Drop Before Summer’s End as Government Weighs Tax Cuts

The Polish government is reviewing a potential temporary VAT reduction on fuel as crude oil markets stabilize, with a final decision expected within days.

Fuel Tax Cut Under Review

The “Lower Fuel Prices” program has returned to the government agenda. Minister of Finance and Economy Andrzej Domański stated on August 11 that analysis regarding a potential re-reduction of fuel VAT is ongoing, with a decision expected within days. He noted that the oil market is stabilizing, though prices at Polish stations remain high.

Domański indicated that a temporary VAT reduction remains the most feasible tax solution for relatively swift implementation. The government previously signaled that this mechanism could apply during the final weeks of summer, a period marked by heavy holiday return traffic.

However, no final decision has been made yet. The intervention depends on the global oil market situation, fuel availability—particularly diesel—and the budgetary costs of another relief program.

Previous Intervention and Costs

The previous program cost approximately 4.7 billion PLN. The initial intervention earlier this year responded to a sharp rise in oil prices linked to the Middle East situation, reducing the base VAT rate on gasoline and diesel from 23 to 8 percent, cutting excise duty to EU minimums, and introducing maximum retail prices.

The program expired at the end of June. According to the Ministry of Energy, the total cost to state finances was about 4.7 billion PLN. On June 30, maximum prices stood at 6 PLN per liter for Pb95, 6.68 PLN for Pb98, and 6.19 PLN for diesel.

The government assumed a large portion of costs would be recovered through a windfall tax on fuel enterprises, projected at around 4 billion PLN—with 3.8 billion PLN entering the budget in 2026 and 200 million PLN in 2027.

Windfall Tax Blocked by Constitutional Tribunal

The initial bill proposed a 60 percent windfall tax rate calculated on the surplus above a reference margin, which was based on the company’s historical margin increased by 20 percent. It was targeted primarily at liquid fuel producers and foreign traders.

However, the bill passed on July 3, 2026, did not enter into force. On July 24, President Karol Nawrocki referred it to the Constitutional Tribunal under preventive control, questioning its compliance with the constitutional principle against retroactivity, as it covered extraordinary profits generated from March 1, 2026.

Pending the Tribunal’s ruling, the law cannot be signed or enacted.

Potential New Tax on Energy and Gas Sectors

The government is not abandoning additional taxation on the energy sector. According to “Rzeczpospolita,” at least two variants of a new levy are being analyzed, with the second expanding taxpayers to include gas market companies.

Limiting the tax to the fuel sector would yield about 4 billion PLN, while the broader variant including the gas sector could generate 7 to 10 billion PLN. Orlen would bear the heaviest burden as the largest domestic fuel and gas market player.

If the 60 percent rate on surplus is retained, a separate baseline reflecting gas trade and production specificities would need to be created. No new bill or final scope has been decided yet, but the government is re-analyzing taxation on excess energy sector results.

Agricultural Fuel Excise Refunds

Diesel prices are particularly critical for agriculture in August during harvesting. Farmers can submit applications for excise tax refunds on diesel between August 3 and August 31, 2026, attaching fuel purchase invoices from February 1 to July 31, 2026.

The refund rate is 1.48 PLN per liter, with a basic limit of 162.80 PLN per hectare. Agriculture Minister Stefan Krajewski announced future plans to increase the excise refund to 2 PLN per liter and provide fertilizer support up to 500 PLN per hectare for farms up to 300 hectares, though these are not current rules.

Direct Links Between Fuel VAT and Budgetary Funding

Andrzej Domański confirmed on August 11 that the government needs a few days to assess the situation, noting limited budgetary capacity due to the missing 4 billion PLN from the stalled windfall tax.

This means both matters are closely connected. The government may lower fuel taxes again while seeking broader funding sources to compensate the budget for part of the operation’s costs.