Polish tax inflows implementation PLN 8 bln lower than planned in 2024 - PKO BP (opinion)

The government has confirmed that it will carry out an update to the 2024 budgetary act, with the planned changes being on its agenda on Tuesday.

"We estimate that the tax inflows implementation may be approximately PLN 37 billion lower than previously assumed in the budgetary act and approximately PLN 8 billion lower than the planned implementation presented with the 2025 draft budget," PKO BP economists assessed.

According to them, the main source of lower inflows will be VAT tax where the gap is estimated at approximately PLN 7.5 billion (EUR 1.7 bln) versus the planned implementation and at approximately PLN 25 billion (EUR 5.8 bln) versus the budget assumptions.

When it comes to CIT tax, PKO BP sees the gap at approximately PLN 1.5 billion (EUR 345 mln) versus the planned implementation and at PLN 11 billion (EUR 2.5 bln) below the budget assumptions. The economists expect the PIT inflows to be approximately PLN 1 billion higher than the planned implementation, but approximately PLN 1.5 billion (EUR 345 mln) lower than the budget assumptions.

"The structure of the tax 'surprises' is in line with the economy trends. It is worth noting that 2024 did bring a stronger than forecasted disinflation - in the draft budget the prices dynamic was assumed at an average level of 6.6 percent, we currently expect it to be at 3.7 percent what significantly lowers the VAT inflows," the economists wrote.

"The labour market situation was a positive surprise, where the wages growth in the national economy scale will amount to approximately 14 percent yearly versus the assumed 9.8 percent. However, the main positive from this difference was probably limited by trends in employment, which were worse than expected," they added.

According to the experts, the scale of deficit growth in the update should not reach the income difference.

"The advancement of spending, which reached 65.5 percent in September is relatively low compared to previous years. It shows that there is a space for saving on the spending side, even when taking into account additional charges incurred from eliminating the flood effects," they wrote.

"The update to the budget and higher deficit will also show the between-term management of the budgetary result and will potentially serve to lower the tensions next year. We expect it to reach PLN 15 to 20 billion," they added.

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