Poland Plans Steep Excise Tax Hike on Tobacco Products, Sparking Debate

The Polish government has announced plans for a significant increase in excise tax on tobacco products, aiming to discourage smoking and boost state revenues. Deputy Minister of Finance Jarosław Neneman revealed that the Ministry of Finance, in collaboration with the Ministry of Health, intends to reform the current excise duty system, which is among the lowest in the European Union at an average of 2.05 euros.

Finance Minister Andrzej Domański stated that the excise tax on cigarettes is set to increase by 25% compared to the current schedule of annual increases through 2027. This hike is expected to raise the price of a cigarette pack from the current PLN 17-18 to PLN 26-27. Neneman dismissed claims that prices would reach PLN 30 per pack as exaggerated.

The reform also includes plans to impose an excise tax on all nicotine-containing products and introduce a PLN 40 fee on vaping devices, both disposable and reusable. The government views these measures as effective tools in combating addiction, arguing that financial deterrents are more successful than health awareness campaigns.

However, the proposed changes have drawn criticism from industry experts and business organizations. The Warsaw Enterprise Institute and Business Centre Club warn that drastic tax increases could disrupt market balance and fuel growth in the black market. Szymon Parulski, a BCC excise tax expert, pointed out the lack of impact assessment for the proposed regulations.

Data from the National Tobacco Industry Association indicates that cumulative excise tax increases from 2022 to 2027 could reach 109% for cigarettes, 165% for smoking tobacco, and 401% for tobacco heater inserts. E-cigarette liquids face a potential 228% increase.

Market representatives are urging the Ministry of Finance to maintain the current excise map, which they claim has provided stability, predictable state revenues, and reduce illicit trade. As the debate continues, the government must balance its public health objectives with potential economic repercussions and industry concerns.

What This Means for Businesses in Poland

Tax policy changes in Poland have direct implications for both domestic and foreign-owned businesses. Companies operating in Poland must stay informed about regulatory developments to optimize their tax position and maintain compliance. The Polish tax system includes CIT (19% standard, 9% for small taxpayers), VAT (23% standard rate with reduced rates of 8% and 5%), and various sector-specific levies.

For international entrepreneurs and investors, understanding the Polish tax landscape is essential for business planning. Poland offers several attractive incentives including the Polish Investment Zone (up to 15 years of CIT exemption), R&D tax relief (up to 200% deduction), and the IP Box regime (5% effective CIT rate on qualified intellectual property income). Professional tax advisory can help identify the most beneficial structure for your specific situation.

The interplay between Polish domestic tax law and international tax treaties is particularly important for foreign-owned entities. Transfer pricing regulations, withholding tax provisions, and anti-avoidance rules (GAAR) require careful navigation to ensure both compliance and optimization.

If you are doing business in Poland or considering entering the Polish market, Zalewski Consulting can help. Learn more about our tax advisory services in Poland, or contact us for a free consultation.