Newsroom, VAT | 16. December 2022

Fuels in Poland – European Commission recommends return to regular VAT rates

Maintaining lower fuel prices would lead to the risk of initiating infringement proceedings against Poland, Deputy Finance Minister Piotr Patkowski told the Polish press agency PAP on 8 December 2022. by

“We are doing everything we can to replace shield solutions that reduce VAT rates on fuel and energy with ones that protect Poles even more effectively from the effects of the energy crisis,” Deputy Finance Minister Piotr Patkowski told PAP.

He further stated that, as announced by Prime Minister Mateusz Morawiecki, next year, the state-owned companies are to “operate on the principle of cost recovery without profit margins to keep gas and energy prices as low as possible for households and vulnerable customers.”

“We want solutions that guarantee lower fuel prices for Poles to continue to work. We have already implemented mechanisms that protect Poles from the effects of inflation. First, already this year, we have lowered gas prices for households and vulnerable customers, i.e. institutions such as schools, hospitals, nursing homes and non-governmental organisations,” noted the Deputy Minister of Finance.

He added that freezing gas prices in 2022 will cost the state budget PLN 10 billion.

“Let’s also remember that in the case of energy prices, which we will freeze next year, this mechanism is a more effective way of lowering bills for consumers and brings better results than lowering VAT rates. In the case of dynamically rising prices for energy sources and gas on the world markets, bills can be reduced by lowering VAT rates, but eventually, they could still be much higher than in 2021 or 2022. Therefore, the mechanism of freezing energy prices is more favourable from the perspective of end consumers, said Piotr Patkowski.

The Deputy Head of the Ministry of Finance also informed that the European Commission had explicitly asked Poland to increase VAT rates on fuel and threatened to launch infringement proceedings and refer the country to the Court of Justice of the EU. The European Commission found that lower VAT rates on fuel and, consequently, lower fuel prices for Poland threaten to violate EU common market rules.

“Maintaining lower fuel prices would lead to the risk of initiating infringement proceedings against Poland,” believes Piotr Patkowski.

Piotr Patkowski also said that this issue could be raised in talks on the release of KPO funds for Poland and that the apparent pressure from the European Commission meant that Poland would have to return to the previous VAT rates on fuel.

He recalled that the gas price freeze is part of the aid package prepared by the Polish government. “It is not to be overlooked that low-income households will be able to get a refund of the VAT paid on the purchase of gas under the 2023 shield package. Such a structure of safeguards is in line with the recommendations of international institutions, which indicate that they should be targeted in the best possible way to the households most in need of this assistance,” said Deputy Minister Patkowski.

In addition, he also pointed out that “in the fuel sector, only the basic tariff applicable in a given EU country can be used, which the EU Commissioner confirmed in a letter to the Minister of Finance last December”. In the case of Poland, the rate is 23 per cent.

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