Will zero VAT disappear? The CEO of Biedronka shares his thoughts

The government wants to restore trade on Sundays.  But do Poles want this?

I will be very surprised if the government decides to restore 5%. VAT rates on food – said Luis Araujo, CEO of Biedronka, at a press conference with the participation of Polish journalists. – Of course, I don't know what the government will do, but I will be surprised if it happens, he added. However, everything indicates that after more than two years of validity, the zero rate will cease to exist.

In his opinion, it is too early for this, and increasing the tax will only make sense when consumers want to buy again. It can be concluded from this that, in the general director's opinion, even lowering prices in the “war with Lidl” does not result in Poles buying as willingly as before the start of inflation in 2021.

– Let us remember that private consumption was one of the factors negatively affecting the economic results last year – emphasized Araujo.

Zero VAT from February 2022

Let us remind you that the rate is 0%. VAT is valid from February 1, 2022 and includes, among others: fruits, vegetables, meat, dairy products and cereal products. If the zero tax rate is not extended, it will return to 5% from April 2024. The government has not yet made a decision on this matter, but it can be suspected that it will not be extended after this date. The lack of VAT reduces public finances because less money flows into the budget.

Zero VAT was introduced in response to rapidly rising food costs: they were responsible for, among others, the actions of Russia, which raised gas prices even before attacking Ukraine. This resulted in an immediate increase in the costs incurred by food producers in our country, and the production of artificial fertilizers also became more expensive. In order not to impoverish society, the government decided to abolish VAT on food products, which were previously subject to 5%. rate. At the same time, the so-called solidarity shields limiting the prices of electricity, gas and district heating.

Abandoning zero VAT will increase the prices of bread by approximately 20 groszy and butter by 30 groszy.

Adam Glapiński: inflation will increase in the second half of the year

The president of the National Bank of Poland, Adam Glapiński, referred several times to the possible departure from the zero rate during the press conference. He explained that despite low inflation (3.9% in January 2024), the Monetary Policy Council did not decide to lower interest rates because it suspected an increase in inflation in the second half of the year. The tax increase is responsible for this increase.

According to the economic model adopted by the National Bank of Poland, the return of VAT to 5%. will mean an increase in the inflation level by 0.9 percentage points. The president of the central bank pointed out that there are also other models, therefore some banks forecast an increase in inflation (due to the abolition of the zero VAT rate alone) by 1.2%.

According to Glapiński, a greater danger for inflation in 2024 will be the partial and gradual abolition of the shield covering electricity, gas and district heating. The government has not yet announced a timetable for abandoning it, but the Minister of Climate promised that she would ensure that there is no “shock” price increase. She also announced that protection will continue to be provided for farms requiring assistance, i.e. those that will not be able to cope with market prices of energy, gas and central heating. It is conservative to estimate that their prices will increase by 30% this year. compared to currently paid bills.

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