Poland’s budget hangs on presidential decisions as vetoes could cost billions

Poland’s 2027 state budget may lose 10 billion to 15 billion zlotys if President Karol Nawrocki blocks planned tax changes and other revenue assumptions prove too optimistic. The draft budget forecasts total revenue of 695 billion zlotys, including 622 billion zlotys in tax receipts. Compared with the expected outcome this year, those figures represent increases of 68.4 billion and 57.8 billion zlotys respectively.

Economists cited by Rzeczpospolita do not consider the targets excessively ambitious. They broadly match the expected economic situation, but part of the plan faces political risk from the start. Erste Bank Poland estimates that presidential vetoes alone could cut revenue by about 8 billion zlotys: 3.5 billion from PIT and CIT, 1.5 billion from excise duties, 1.3 billion from VAT and 1.7 billion from a planned digital tax.

The bank also considers the budget’s non-tax revenue assumptions somewhat optimistic. Those receipts are expected to rise by 20% year on year. Combined with the possible vetoes, that could leave state revenue well below the government’s projection.

The risk is not merely theoretical. Nawrocki said at the beginning of his term that he would not accept tax increases, and he has generally followed that pledge. The exception was a higher CIT rate for banks. The president has blocked six other laws affecting the budget, which the Finance Ministry calculated reduced this year’s state revenue by about 8 billion zlotys. The most costly veto concerned a tax on windfall profits at fuel companies, estimated to have cost 3.8 billion zlotys. A planned alcohol excise increase would have raised another 1.8 billion.

Piotr Arak, chief economist at VeloBank, said there was roughly a 90% chance that the latest government reform would also fail. The proposal includes major changes to PIT, CIT and lump-sum taxation. Its PIT provisions would raise the threshold for the 12% rate from 120,000 to 130,000 zlotys and introduce a new 24% rate for income between 130,000 and 150,000 zlotys. The government says the changes would increase net pay for about 3.5 million middle-class workers, but a veto would complicate fiscal consolidation and increase the risk of a lower Polish credit rating.

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I think there is even about a 90% chance that the latest government reform will also fail to enter into force.