This article is a part of Poland Unpacked. Weekly intelligence for decision-makers
The Ministry of Finance has published its latest preliminary figures on the execution of the state budget for the first six months of the year. State budget revenues amounted to PLN 278.6 billion (EUR 65.5 billion), while expenditures reached PLN 402.4 billion (EUR 94.7 billion). This resulted in a budget deficit of approximately PLN 123.7 billion (EUR 29.1 billion).
Interactive chart However, as we have repeatedly argued in these pages, the key measure for assessing the state of the public finances is not the headline budget deficit itself, but the general government deficit – that is, the deficit of the central and local government sector as defined under EU accounting methodology.
Very weak VAT performance in May…
How have VAT revenues – the most important component of state budget income – performed so far? From the beginning of the year through June, they amounted to PLN 161.2 billion (EUR 37.9 billion), an increase of just PLN 0.3 billion (EUR 70.6 million), or 0.2%, compared with the same period last year. This growth rate is significantly below the level assumed in the 2026 Budget Act. Under the budget plan, VAT revenues are expected to increase by 6.2%.
It is worth noting that, under the EU methodology, annual VAT revenues include receipts collected between February and December of year n and January of year n+1. Due to the exceptionally weak February result – a decline of approximately 25% - total VAT revenues measured this way are PLN 7.9 billion (EUR 1.9 billion) lower than in the corresponding period last year, representing a 6.2% decline. This is the measure that will be crucial when assessing Poland’s deficit under the Excessive Deficit Procedure.
In May alone, VAT revenues fell by nearly 9% year on year. VAT payments made in June relate to May tax declarations, meaning they still reflect the impact of the government’s Lower Fuel Prices (Ceny Paliw Niżej abbreviated as CPN - pun intended, see the explainer) program. In VAT terms, the scheme involved reducing the tax rate on liquid fuels from 23% to 8%.
Explainer
CPN: the fuel station that fueled communist Poland
If you've spent any time in Poland talking to people old enough to remember the PRL – the Polish People’s Republic – you'll eventually hear someone mention CPN with a mix of fondness and exasperation. Fun fact: some of them still call any fuel station a CPN. Simple as that.
CPN stood for Centrala Produktów Naftowych – the Central Petroleum Products Authority. In plain terms, it was the only petrol station in Poland. Not one chain among many. The only one, full stop.
In 1981, CPN employed a total of 14,200 people and 5,600 petrol station agents, and had 43 fuel laboratories operating in the country. It was, in other words, an enormous state apparatus built around the simple act of filling up a tank.
When communism collapsed and Poland began its transformation, the days of CPN as a monopoly were numbered. CPN was restructured as a state-owned limited liability company in 1995. By the end of the decade, CPN's operations included more than 1,400 service stations, 156 fuel depots, a 600-strong fleet of tanker trucks, port operations, and 22 research laboratories.
In 1999, the Polish Council of Ministers decided to partially privatise and merge CPN with Petrochemia Płock, the state firm in charge of the oil refineries in Płock. The resulting company was renamed Polski Koncern Naftowy (PKN), with Orlen added several months later as the brand name.
…and excise duty stuck at zero growth
Revenues from excise duty amounted to PLN 44 billion (EUR 10.4 billion) and were approximately PLN 1 billion (EUR 235 million) higher than in the January–June 2025 period, representing an increase of 2.3%. In June alone, they were virtually unchanged compared with the previous year, rising by only around 0.3%.
In the case of excise duty, the Lower Fuel Prices (CPN) program reduced rates on diesel fuel and motor gasoline by 24% and 19%, respectively. Under the budget law, excise duty revenues are expected to increase by 11.6% this year.
The reduced VAT and excise duty rates introduced under the CPN program have now expired. The excise duty cut was in place until June 15, while the VAT reduction remained effective until June 30. As a result, the next state budget execution report will still show the program’s impact on VAT revenues and, to a lesser extent, on excise duty (as July payments relate to June transactions).
This means that both VAT and excise duty revenues are on track to fall short of this year’s budget targets. VAT is particularly concerning. It appears that the CPN program alone does not explain the tax’s structural weakness this year.
CIT and PIT come to the rescue
Revenues from direct taxes (CIT and PIT), however, are rising significantly. In the case of corporate income tax (CIT), state budget revenues are approximately PLN 8.8 billion (EUR 2.1 billion) higher than a year earlier, representing a 24% increase. The most important factor behind this growth is the increase in the corporate tax rate for banks.
Personal income tax (PIT) revenues are also growing rapidly, driven by the freezing of tax parameters. The increase is visible both in the state budget and in the revenues of local government units (JSTs). PIT revenues have risen by PLN 11.2 billion (EUR 2.6 billion) year on year, or 12.5%.
A return of the CPN program appears unlikely
The key question is whether rising CIT and PIT revenues, along with additional income from taxes on windfall profits, will be sufficient to close the gap created by weak VAT and excise duty revenues. In any case, given the poor performance of these taxes, I would not expect the CPN program to be reintroduced. Even if the ongoing escalation of the war between the United States and Iran leads to a sustained increase in fuel prices at petrol stations, the government appears to have limited room for maneuver in light of these budget figures.