Fuel VAT Cut Will Cost the State Budget Nearly Half a Billion Zlotys

The Ministry of Finance has announced that the temporary reduction of the VAT rate on fuels in the second half of August will reduce state budget revenues by approximately PLN 495 million.

Ministry of Finance Announces Budget Impact

The Ministry of Finance reported that the renewed reduction of VAT on fuels in the second half of August will deplete state budget revenues by approximately PLN 495 million.

On Thursday, an amendment to the regulation of the Minister of Finance and Economy regarding reduced rates of goods and services tax was published in the Journal of Laws, providing for a reduction of the VAT rate on petrol and diesel from 23 percent to 8 percent. The regulation entered into force on Thursday, while the VAT reduction will apply from August 17 to August 31.

Two-Week Reduction Period and Market Response

VAT on fuels drops from 23 to 8 percent, with the reduction lasting for two weeks.

In response to the dynamic situation on global fuel markets, the reduction of the VAT rate on specific motor fuels has been reintroduced. Although a temporary drop in fuel prices was noted in recent months allowing for stabilization of market sentiment, the current situation requires another intervention, with the cost to the state budget estimated at approximately PLN 495 million, according to the Ministry of Finance in response to a PAP inquiry.

Prime Minister Tusk Announces Program Restoration

The restoration of part of the “Lower Fuel Prices” package in the form of a reduced VAT tax for the last two weeks of August was announced earlier on Thursday by Prime Minister Donald Tusk, who stated that this should cause fuel prices to drop by 90 groszs to over 1 zloty per liter, with maximum prices at stations remaining in effect until the end of the month.

Previous Implementation and Costs of the CPN Package

Cheaper petrol and diesel in August occur as the government restores part of the CPN program.

The CPN package introduced at the end of March was a response to rapidly rising oil prices due to the US and Israeli conflict with Iran that broke out on February 28, lasting until the end of June and encompassing regulations applying a reduced VAT rate on certain fuels—primarily petrol and diesel—alongside establishing maximum prices at gas stations, as well as a temporary fuel excise tax reduction that lasted until mid-June.

The Ministry of Finance informed that the previous cost of the CPN program amounted to approximately PLN 4.7 billion.

Ongoing Middle East Conflict and Current Oil Prices

Due to the still uncertain situation in the Strait of Hormuz, crude oil prices remain higher than before the outbreak of the Middle East conflict, with Brent crude valued at $87.99 per barrel and WTI at $82.26 on Thursday evening.