The Polish government’s decision to terminate certain tax benefits has significantly altered the shopping landscape for Czech citizens, impacting their purchasing power and cost savings. Following the discontinuation of tax discounts on fuel in March, the government is now set to abolish the zero Value Added Tax (VAT) previously applied to basic food items. This zero VAT provision, implemented since February 2022 amidst soaring inflation rates, will be replaced by a reinstated five percent tax rate starting April.

The reintroduction of the five percent tax rate is expected to lead to price increases across various essential food categories, including dairy products, meat (including fish and its derivatives), eggs, vegetables, honey, animal and plant fats, bread, bakery items, and even baby food.

The decision, announced by the Polish Ministry of Finance, follows Prime Minister Donald Tusk’s indication of this move last week. Despite Tusk’s optimism regarding minimal price impacts, ordinary Polish citizens express skepticism, foreseeing a rise in food prices. Forty-year-old Andrzej from Auschwitz voiced concerns, stating, “Food is already expensive, and it will become even more so after the VAT is introduced.”

According to the Ministry of Finance, the rate of increase in food and non-alcoholic beverage prices slowed to 4.9 percent in January, marking the slowest growth since September 2021. However, the ministry anticipates a further deceleration in price growth for February and March. The attractiveness of shopping in Poland for Czech citizens has already been compromised since January by the weakening of the Czech koruna against the Polish zloty, experiencing nearly a 15 percent depreciation year-on-year.

The termination of tax benefits in Poland underscores the broader economic implications for cross-border shopping and consumer behavior, particularly impacting neighboring countries like the Czech Republic. As Czech citizens navigate these changes, they may reassess their shopping habits and explore alternative options within their domestic market or neighboring regions to mitigate rising costs and maintain affordability.

Article by Prague Forum