Poland cuts VAT on petrol to soften impact of inflation

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WARSAW, Jan 7 (Reuters) – Poland will cut tax on petrol from next month to shelter consumers from a surge in inflation, the prime minister was quoted as saying on Friday, a measure that will cost 1.5 billion zlotys ($372.42 million) per quarter.

The decision to lower VAT on petrol to 8% from 23% follows previous tax cuts on petrol, gas, electricity to help Poles deal with the fastest price growth in over two decades.

“This is another action… to help Polish families and Polish entrepreneurs in everyday life,” Mateusz Morawiecki was quoted as saying by the Interia website. “After all, the price of fuel translates into the vast majority of prices.”

Morawiecki said the tax reduction would lower the price of a litre of petrol to around 5 zlotys, from about 5.70 now, effective from Feb. 1 and initially applied for six months.

Morawiecki also said a previously announced plan to reduce VAT on basic food items to zero would cost 6-7 billion zlotys per year and that details of when it would come into effect would be announced next week.

Fuel subsidies are a divisive issue. Analysts say they can exaggerate inequality because they benefit wealthy people who consume more most. Critics are particularly opposed to subsidising fossil fuels as the world seeks to lower its carbon emissions.

The strain of inflation on household budgets poses a headache for Poland’s ruling nationalists Law and Justice (PiS), which has built much of its electoral success on boosting ordinary citizens’ spending power through generous social benefits and minimum wage increases.

($1 = 4.0277 zlotys)

(Reporting by Pawel Florkiewicz and Alan Charlish; editing by Barbara Lewis)

Photo – View of a PKN Orlen gas station in Warsaw, Poland. EPA-EFE/MATEUSZ MAREK

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