Poland Debates Increasing Personal Income Tax Thresholds Amid Cost of Living Concerns

The Polish Sejm has approved raising the first income tax threshold to 171,000 złotych, a move lawmakers say is necessary to address rising living costs. According to INFOR.PL, the decision comes after months of political debate over tax policy amid inflation and wage stagnation.

The new threshold, set to take effect in 2027, will exempt the first 171,000 zł of annual income from the 12% tax bracket, up from the current 120,000 zł. The change applies only to the first tax bracket; negotiations over the second threshold (currently 240,000 zł) remain unresolved, with some factions warning it could worsen fiscal pressures.

Economic analysts warn the adjustment may not fully offset inflation’s impact. "The problem will deepen unless the second threshold is also raised," said a tax policy expert at TVN24, citing projections that real wages have fallen by 5% since 2023. Meanwhile, opposition parties accuse the ruling coalition of targeting middle-income earners, with one lawmaker telling Money.pl that "the minister responsible for this file didn’t even consult us."

The decision follows years of wage growth outpacing tax adjustments. In 2023, the average monthly salary in Poland reached 7,400 zł, but the first tax-free threshold had remained unchanged since 2021. The government argues the increase will benefit 8.5 million taxpayers, though critics note the 42,000 zł hike falls short of the 100,000 zł demanded by some economists to restore pre-inflation purchasing power.

What happens next?
The second tax threshold remains in political limbo, with Radio Szczecin reporting that lawmakers are engaged in "a bidding war" over its level. The Ministry of Finance has not yet announced a formal timeline for further adjustments, leaving businesses and unions to speculate about the broader fiscal impact. Meanwhile, the European Commission is monitoring the changes for compliance with EU state aid rules, though no formal objections have been raised.

Why was the first threshold raised now?
The Sejm’s decision reflects pressure from public protests over stagnant real wages, with polls showing 68% of Poles support tax relief measures. The move also aligns with a broader trend across EU nations, where 12 countries have raised personal income tax allowances since 2022—though Poland’s adjustment is among the smallest in relative terms.

How does this compare to other EU tax reforms?
Poland’s 42,000 zł increase is smaller than recent changes in Germany (54,000 zł) and France (48,000 zł), but larger than Hungary’s 30,000 forint hike. The OECD projects that without further reforms, Poland’s tax burden on middle incomes will rise by 0.8% by 2028—contradicting the government’s claim that the change is "pro-growth."

What’s the fiscal risk?
The government estimates the first-threshold change will cost 3.2 billion zł annually, funded by a planned 0.5% increase in VAT on luxury goods. However, the National Revenue Administration has flagged potential revenue shortfalls if inflation outpaces wage growth, as it did in 2023. "This is a short-term fix with long-term consequences," warned a budget analyst at TVN24, noting that similar measures in 2020 contributed to a 15% deficit spike.

Who benefits most?
Single earners with annual incomes between 120,000 zł and 171,000 zł will see their tax bills drop by up to 5,040 zł yearly. However, dual-income households earning below 240,000 zł will see limited relief unless the second threshold is also raised. The change does not affect the 32% tax bracket for incomes above 500,000 zł.

What’s the political fallout?
Opposition parties have accused the ruling coalition of prioritizing symbolic gestures over structural reforms. "This is a political stunt," said a lawmaker from the Civic Coalition, adding that the government had ignored expert recommendations to index thresholds to inflation. Meanwhile, the Confederation of Polish Employers (KP) welcomed the move but called for complementary labor-market reforms to boost productivity.

Key figures

• New first threshold: 171,000 zł (up from 120,000 zł)
• Tax savings for affected earners: Up to 5,040 zł annually
• Estimated annual cost to treasury: 3.2 billion zł
• Projected real wage loss since 2023: 5% (TVN24)
• EU average tax-free threshold increase (2022–2024): 38% (vs. Poland’s 35%)

Sources

• INFOR.PL (Sejm decision, June 15, 2026)
• TVN24 (economic analysis, June 14, 2026)
• Money.pl (opposition statement, June 13, 2026)
• Radio Szczecin (political negotiations, June 12, 2026)
• National Revenue Administration (fiscal impact projections, May 2026)