Poland ends fuel tax breaks, plans windfall tax on energy firms

Poland is dismantling its "Lower Fuel Prices" program, a package of subsidies designed to ease the burden of high fuel costs. Prime Minister Donald Tusk announced the government's decision to begin by removing the reduced excise tax on fuel, with a subsequent step to eliminate the lower value-added tax (VAT) rate.

Tusk explained that the program, which included reduced excise and VAT rates and capped fuel prices, was costly but implemented in the public interest. He indicated that recent international developments, specifically an agreement between Iran and the U.S., were expected to stabilize and lower oil prices. "We are moving away from excise duty now, and in some time there will be a decision regarding VAT," Tusk stated, adding that the program had fulfilled its purpose.

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It cost a lot, but we did it in the interest of the people. We moved away from the part concerning excise duty yesterday, because we assumed – and assumed correctly – that the agreement between Iran and the U.S. should not only stabilize but lead to a drop in oil prices, and thanks to that, we have a situation where fuel tomorrow will be at the same price as when we did not collect excise duty.

To offset the revenue loss from the fuel subsidies, the government plans to introduce a tax on extraordinary profits earned by fuel companies. Tusk asserted that these companies, which he believes profit significantly during crises, would largely finance the program. "These companies will largely finance the cost of the fuel price program. They will not lose on it, but they will not profit either," he said.

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We are moving away from excise duty now, and in some time there will be a decision regarding VAT.

The government is set to approve a bill imposing a 60% tax on these "windfall" profits, down from an initially planned 75%. The Ministry of Finance estimates this new levy will generate approximately 4 billion Polish zloty (about $1 billion USD), with 3.8 billion zloty expected this year. These funds are intended to compensate for the reduced VAT and excise tax revenues. The law is slated to take effect on August 1, 2026.

The "Lower Fuel Prices" package, active since late March, had reduced VAT on gasoline and diesel from 23% to 8% and lowered excise duties. The government had also implemented a mechanism for maximum fuel prices during the period of reduced tax rates.

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We assumed that large fuel companies have extraordinary profits in such situations. Such crises favor not only higher prices but also higher profits. And that is why today we will make a decision on the tax on extraordinary profits, so these companies will largely finance the cost of the fuel price program. They will not lose on it, but they will not profit either.