The Polish government has announced its plans to reshuffle the country’s tax burden, with the growing middle class hoping to benefit from rising income tax thresholds that are to be offset by higher corporate and high-income taxes.
The changes, which require both parliamentary and presidential approval, would take effect from next year.
Unveiling the proposals, Prime Minister Donald Tusk said that the measures would provide “relief and help” to an estimated 3.5 million taxpayers.
The reorganization would see three personal income tax (PIT) brackets, rather than the current two.
At present, the first bracket taxes earnings of up to 120,000 zloty (approximately €27,800; $32,600) at a rate of 12%, while the second bracket taxes earnings above that level at a rate of 32%.
Under the current arrangement, earnings of up to 30,000 zloty (approximately €6,900; $8,150) are not taxed.
However, the new system would see the threshold for the first 12% tax bracket raised to 130,000 zloty (approximately €30,100; $35,300).
A new, intermediate rate of 24% would be introduced for income between that threshold and 150,000 zloty (approximately €34,700; $40,700).
Earnings above 150,000 zloty would be taxed at the third, highest rate of 32%.
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Observers have been quick to note that far from providing far-reaching tax relief, the changes are only likely to be felt by a section of the middle class – specifically, higher earners. A person on an average wage in Poland of around 9,500 zloty (roughly €2,200; $2,580) per month, or 114,000 zloty (roughly €26,440; $31,000) per year will be unaffected by the proposals.
Meanwhile, the government estimates that the 3.5 million taxpayers who would be affected by the tax bracket changes could see savings of up to 3,600 zloty (approximately €835; $980) per year.
Wages Rise as the Economy Booms
The Polish economy is one of the fastest-growing in the European Union, a development that has been accompanied by rising wages that have brought more Poles into the higher tax bracket.
At the press conference announcing his government’s tax plans, Tusk said that since his coalition took office in late 2023 average wages have increased by around 30%.
The introduction of the new PIT scale in 2027, the prime minister and his finance minister, Andrzej Domanski, claim, would reduce the percentage of taxpayers at the 32% rate to 7.2% instead of the projected 14%.
In order to offset the billions lost in tax revenue as a result of the income tax changes, Tusk’s government is proposing a simultaneous increase in the corporate tax rate from its current 19% to 22% for companies with annual revenues exceeding 200m zloty (or approximately €46m; $54.3m).
The reform also includes a one-percentage-point increase from 4% to 5% for the “solidarity levy”, which applies only to income exceeding 1m zloty (approximately €231,500; $271,500).
“I am convinced that the changes will make the tax system fairer, and the benefits will accrue to those who currently bear the heaviest burdens”, Tusk said, adding that Poland’s middle class “largely bears the burden of financing the state and defense spending”.
The legislation in question is expected to be submitted to the Polish parliament shortly, where Tusk’s ruling coalition has a majority. However, even if parliamentary approval is secured, the proposals will also require approval from opposition-aligned President Karol Nawrocki.
Nawrocki has vetoed a record number of bills since taking office last year, proving to be a considerable roadblock for the Tusk government in meeting many of its election promises.
Both the government and the opposition, President Nawrocki included, have an eye on next year’s parliamentary elections, and as such will be careful not to take fiscal steps likely to be viewed unfavorably by the voting public.
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Trouble on the Horizon
However, the Polish state does not have much room to maneuver, the country’s economic success coming alongside soaring costs.
Since July 2024, Poland has been subject to the European Union’s excessive deficit procedure (EDP). The EDP is a corrective mechanism, partly intended to bring member states back under the agreed limit of 3% of GDP.
However, the deficit rose again last year, from 6.4% of GDP in 2024 to 7.3% in 2025. In addition, Poland’s public debt (61.6% of GDP) rose above the EU’s limit of 60% of GDP this year.
Despite the Polish government setting out plans for alleviating the precarious fiscal situation, two of the Big Three credit rating agencies, Fitch and Moody’s, have designated Poland’s outlook as negative.
A negative sovereign credit outlook indicates that a country’s financial health is slipping, meaning that its credit rating may well be downgraded in the coming months or years. This assessment can come as a result of different factors, ranging from persistent budget deficits to political instability.
Deteriorating institutions and external vulnerabilities are also typical considerations when determining a country’s credit outlook.
In March this year, Fitch identified "political gridlock" as one of the key challenges constraining Poland's fiscal reform capacity.
"Along with weakened public finances, the confrontational relationship between the president and government constrains the latter’s policy and reform capacity, especially with regards to fiscal consolidation measures", the rating agency said.
