The VAT gap in Poland is down again, but the budget is under pressure. Will we have new taxes?

Budget execution data for 2025 suggest that the VAT gap in Poland probably decreased last year – says Grzegorz Poniatowski, partner at the consulting company Syntesia Policy & Economics, leader of the analytical team estimating the VAT gap in the EU commissioned by the European Commission (2015-2025).

“Looking at the data on the estimated implementation of the budget in 2025 and the almost 12% increase in VAT revenues, and assuming that there were no significant shifts in VAT refunds year to year, and taking into account the quick estimates and forecasts of the Central Statistical Office, it can already be estimated that revenues grew faster than the tax base. This is a nominal base, the key component of which is household consumption. This suggests that the VAT gap has decreased in 2025,” Poniatowski told PAP Biznes.

On Tuesday, the Ministry of Finance published estimated data on the implementation of the budget for 2025. VAT revenues amounted to PLN 321.6 billion last year and were higher by approximately PLN 34 billion (+11.8%) compared to 2024.

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Preliminary data from the European Commission show that after an increase to 16.0%. in 2023 (from 11.2% in 2022), in 2024 the VAT gap in Poland decreased to 10.9%.

KSeF as a “digital guardian” of the state treasury

As Poniatowski points out, the National e-Invoice System (KSeF) introduced this year may have a positive effect on improving VAT collection.

“In one of our reports, prepared for the European Commission, we analyzed a fairly wide set of countries that introduced various types of reporting solutions – from simpler ones, such as the Single Control File, to more complex real-time reporting systems, such as KSeF. The data shows that countries that introduced more advanced reporting systems, such as Italy, observed a reduction in the VAT gap,” said Poniatowski.

It can be seen that these tools had a greater positive effect than periodic reporting of transaction data. Therefore, I think that in the long term we can expect that we will also observe a similar, positive effect in Poland – he added.

The economist notes that the effects may, however, be visible in the longer term.

“Now the administration is focusing on the implementation of the KSeF system rather than on data analysis, so we will probably see the effects only in the long term. Nevertheless, the administration has been given tools for a faster and more effective response. Moreover, taxpayers who know that information on all transactions is available in real time are less prone to potential fraud,” said Poniatowski.

Hence, in the long term, I would expect that the VAT gap may decline further. Our estimates show that the implementation of this type of solutions results in an average decrease in the VAT gap by 3 to 6 points. percent, so the statistical error of these calculations was significant – he added.

High deficit trap – public debt under the agency's microscope

Poniatowski emphasizes that the increased fiscal deficit in Poland will require consolidation measures, both on the revenue and expenditure side.

“Poland's increased and, to some extent, permanent fiscal deficit is a long-term problem. For several years now, the deficit of the general government sector has been at levels significantly different from the EU threshold of 3 percent of GDP. Continuation of such high levels inexorably leads to an increase in public debt in relation to GDP. In addition to significantly increased debt servicing costs, the excessive deficit procedure open to Poland is also a problem,” the business economist told PAP.

“It seems that rThe financial sector will have to take actions aimed at consolidating fiscal activities, both on the expenditure side and on the revenue side.j” – he added.

Armaments and social welfare, or why there will be no budget cuts

In the economist's opinion, however, the space for reducing the deficit on the side of budget expenditure is small.

“However, looking at the expenditure side – Expenditures on broadly understood defense are very high and will probably remain soalthough perhaps their share in GDP will slightly decrease. Now we spend over 4%. GDP for defense and in the current geopolitical situation, I don't see any possibility for these expenditures to suddenly drop to, for example, 2%. Hence, when it comes to these expenses, the room for reducing the deficit is insignificant,” Poniatowski said.

“When it comes to rigid expenses, e.g. for social programs – for political reasons, there is probably no room for cuts here either, although in the conditions of solid economic growth, their role in relation to GDP is decreasing. However, this is not such a large decrease that it will play a significant role in reducing the deficit,” he added.

There is more room for fiscal consolidation on the revenue side of the budget.

Looking for money on the income side: Who will pay for consolidation?

“It seems that on the expenditure side there is not much room for consolidation, I see more room for reducing the deficit on the income side, here, for example, we have several automatic factors stabilizing the situation. For example, there is some benefit from maintaining rigid PIT tax thresholds in recent years. Incomes are growing and more and more people fall into the higher threshold and pay higher taxes,” the economist pointed out.

“Improving tax collection may also help, among others thanks to such systems on the KSeF. However, such 'automatic' solutions are unlikely to help reduce the deficit to 3% of GDP in the coming years, the Ministry of Finance will have to look for additional solutions,” he added.

According to Poniatowski, the government may decide on point solutions, e.g. introducing special taxes that will affect narrow sectors.

“The pressure to improve the fiscal situation will increase, both from the European Commission and the financial markets. I therefore imagine that the government will come up with ideas for various types of special taxes that will affect narrow sectors or groups of people, and not all citizens – this would be difficult to justify,” he said.

“In the face of the image failure of the last tax reform, the so-called Polish Order, it may be difficult for the government to implement a broader reform. I would rather assume point solutions or taxes, such as the recent changes in the corporate income tax on the banking sector. The upcoming parliamentary elections in 2027 and the difficult cohabitation of the government with the president are also important here,” he added.

Poland's rating: status quo despite the tense situation

Despite the tense fiscal situation, the economist does not expect any changes in Poland's rating in the coming months.

“There is no significant turning point on the horizon that could change the picture of the situation and influence the agency's decisions. Of course, geopolitics may interfere here, but these factors are very difficult to predict. The budget act for 2026 is already discounted by the market and rating agencies, only the assumptions of the next budget, for 2027, may be a potential impulse, but these will appear only in the middle of the year,” Poniatowski said.

“There is no potential dispute between Poland and the European Commission on the horizon, and this factor, for example, caused concern among rating agencies in the past. Hence, I assume that the status quo will be maintained when it comes to ratings,” he added.

In January 2026, the Fiscal Council began operating in Poland. Its main task is to assess macroeconomic forecasts used for the purposes of the Budget Act and medium-term budgetary and structural plans, to provide opinions on the compliance of the Budget Act with national and EU fiscal rules, as well as to assess the coherence and effectiveness of the national budget framework.

In the opinion of Grzegorz Poniatowski from Syntesia Policy & Economics, the existence of the Fiscal Council should improve the quality of public debate on fiscal policy in Poland, but its impact on actual policy will not be significant.

“Looking at the experience of various countries that introduced fiscal councils or various fiscal rules, it seems that their effectiveness is not very high. Even very rigid, numerical fiscal rules were diluted by changing parameters or simply changed by using various legal provisions. Therefore, even hard-written fiscal rules were usually not a sufficient brake for those in power,” the economist told PAP.

“I am a big supporter of the newly established Fiscal Council in Poland and I trust that its existence will raise the bar and the quality of public debate on fiscal policy, but I do not assume that its impact on the actual fiscal policy will be significant. I assume that the European Commission will have a greater impact on reducing the fiscal deficit in Poland than the fiscal council,” he added.

Patrycja Sikora (PAP Biznes)

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