Poland considers tax reforms amid rising defense and health costs

Poland is considering significant changes to its tax system and facing budgetary pressures as it prepares for the 2027 fiscal year. To mitigate the sharp jump between the current 12 percent and 32 percent personal income tax (PIT) rates, government discussions have surfaced regarding the introduction of an intermediate 24 percent tax bracket. Proposals for the threshold of this new bracket vary, with Minister Katarzyna Pełczyńska-Nałęcz suggesting an increase of the second threshold to 140,000 PLN, while opposition figure Przemysław Czarnek has proposed 180,000 PLN.

Simultaneously, Prime Minister Donald Tusk has urged ministers to exercise fiscal restraint due to rising national debt and mandatory spending increases. The 2027 budget faces pressure from rising defense costs, which are expected to approach 5 percent of GDP, and increasing healthcare expenditures aimed at reaching the statutory 7 percent of GDP target. These rising costs for the military and the National Health Fund (NFZ) are limiting the fiscal space available for new government initiatives.