Poland’s ruling coalition is preparing a major overhaul of the Personal Income Tax system, with changes potentially taking effect as early as 2027. Finance Minister Andrzej Domański will have to decide between three distinct scenarios – raising the tax-free allowance, lifting the second tax threshold, or introducing multiple tax brackets – each with different implications for taxpayers and the state budget.
According to reports from Wirtualna Polska, the government is still in the deliberative phase, with no final decision made. A source close to the ruling camp confirmed that various options are being tested but no conclusions have been reached yet. The choice will ultimately depend on the fiscal room available in the 2027 budget.
Higher tax-free allowance: Broad relief, high cost
The first scenario involves increasing the tax-free allowance, currently set at 30,000 PLN annually. Because this measure would affect over 20 million taxpayers, it is the most visible and broadly felt relief option. However, the budgetary cost is substantial – a significant increase in the allowance could run into tens of billions of zlotys, making it the most expensive of the three proposals. This option would mean lower PIT for the vast majority of Poles, but the fiscal burden raises serious questions about affordability given the current state of public finances.
Tax threshold lift: Targeted relief for higher earners
The second proposal focuses on raising the second tax threshold, which currently kicks in at 120,000 PLN of annual income. Above this level, the tax rate jumps from 12 percent to 32 percent. Proposals under discussion reportedly include lifting the threshold to 140,000 PLN or higher. The practical effect would be that fewer taxpayers would fall into the higher bracket, providing targeted relief mainly to better-earning individuals. This scenario is considerably cheaper for the budget than raising the tax-free allowance, which gives it an edge in the current fiscal climate.
The third and most ambitious scenario would replace the current two-tier system with a multi-bracket structure. Additional intermediate rates would be introduced, smoothing the abrupt jump in tax liability that currently occurs at the threshold. While this approach would allow for more precise alignment of tax rates with actual income levels, it is also the most complex reform politically and administratively. Implementing such a change would require significant legislative work and broad political consensus, which is far from guaranteed.
– Various options are on the table, various are being tested, but so far there is no conclusion – a government source told Wirtualna Polska.
Budget constraints and the frontrunner scenario
The decisive factor narrowing the government’s choices is the strained state of public finances. With limited fiscal space, the most expensive options are less likely to move forward. Raising the tax threshold appears to be the most realistic path at this stage – it offers a politically palatable compromise between delivering tax relief and maintaining budget discipline. It is cheaper than hiking the tax-free allowance and simpler than restructuring the entire tax bracket system.
Still, a hybrid approach has not been ruled out. The government may ultimately opt for a combination of measures, phasing in changes over several budget cycles to spread the fiscal impact. This would allow the ruling coalition to deliver incremental relief to taxpayers while keeping the budget deficit under control. The final decision will likely emerge in the coming months as the 2027 budget takes shape.
Źródło: WNP.PL, Fot. KPRM
