Rising Taxes and Decreasing Purchasing Power in Poland

The Polish Sejm has approved an increase in the first income tax bracket to 171,000 PLN, a move aimed at mitigating the impact of rising living costs on taxpayers.

Addressing the Cost-of-Living Gap

The decision to adjust the tax threshold comes as lawmakers acknowledge that previous limits failed to keep pace with economic realities. According to public statements, the move was necessary because the existing bracket was

“inadequate to the cost of living of citizens.”

By raising the limit to 171,000 PLN, the government intends to provide relief to middle-income earners whose real income has been squeezed by inflation.

The Erosion of Purchasing Power

The policy shift highlights a stark decline in the real value of earnings in Poland. Data indicates a significant drop in purchasing power over the last few years; specifically, an amount of 120,000 PLN in 2022 is now equivalent to only 91,000 PLN in today’s economy.

This devaluation effectively acts as a hidden tax, as taxpayers find their disposable income diminished even if their nominal wages remain steady or increase slightly. This trend has contributed to a broader perception of a systematic increase in the tax burden on the population.

Revenue Gains and Tax Compliance

Despite the move to provide relief, the Polish tax office has already seen a substantial windfall. Local reports indicate that the state did not need to formally raise tax rates to increase its intake, as Polish taxpayers contributed an additional 13 billion PLN in payments.

However, this revenue growth is juxtaposed with rising concerns over tax avoidance. Reports suggest that some taxpayers have found loopholes to artificially lower their tax liabilities, a trend described as a “plague” affecting the system’s integrity.