MNI INTERVIEW: Polish Banks See Tax Hikes Persisting

Poland’s government is likely to fail to meet a promise to reduce corporate income tax on banks from its newly-higher rate, meaning that lenders face paying 30% for years to come, a senior industry official told MNI, warning of higher credit costs for households and firms at a time when political uncertainty is constraining investment. 

Under plans announced last year by Prime Minister Donald Tusk’s Civic Coalition, the tax on banks is supposed fall to 23% by 2028, after an increase from 19% to 30% from 2026. However, with no new measures expected to be introduced following consultations with Finance Minister Andrzej Domanski, bankers don’t believe the increase will be reversed.

“We strongly expect that the Act will be prolonged at the higher rate, and that it will stay there,” Polish Bank Association President Tadeusz Bialek said in an interview.

While central bank rate cuts are prompting banks to lower lending rates to customers, some of the cost of the tax increase will be passed onto customers, Bialek said.

“It's impossible that some of it won’t be. To say otherwise would be a lie.”

With European capital markets relatively small and likely to remain so for years, Poland’s banks meet 87% of the economy’s financing needs, Bialek said, calling the targeting of banks for tax increases discriminatory and unconstitutional and noting that share price losses since October’s announcement will hit pension savings.

EASY TARGET

Banks were an easy target following their best financial results since 1989 helped by high interest margins, as the government comes close to breaching the constitutional limit of public debt of no more than 60%, Bialek said.

Poland’s economy will grow by around 3.5% this year, yet levels of investment remain low when compared to other European economies, Bialek said. While the cost of credit is “quite high”, political uncertainty, legal uncertainty and tax uncertainty are “clearly” important contributory factors, posing major challenges to businesses and banks.

National Bank of Poland Governor Adam Glapinski recently suggested that interest rates - currently 4% - may stabilise at 3.5%, though the PBA’s baseline case remains a terminal level of 3%, even if government energy price subsidies are removed, Bialek said. (See MNI EM NBP WATCH: Rates Held At 4% As Expected)

One possible source of upside pressure is the likely impact on wages of hundreds of thousands of working war refugees returning home to Ukraine in the event of peace. 

“This would have an enormous impact on our labour market. Of course, a lot of Poles are currently returning to Poland from places like the UK, Ireland and Germany, but there is still a visible shortage.” (See MNI EM INTERVIEW: Jury Out On 2026 Inflation - NBP's Tyrowicz)

BOND HOLDINGS

The government’s growing economic weight since the pandemic has encouraged banks to build up public debt portfolios, said Bialek, noting that Polish banks hold around 50% of all domestic government bonds, the highest level in the European Union

“Last February, for the first time ever, we held in our assets more public debt than loans granted. That is far from ideal,” he said.

“We are currently as a banking sector in Poland over-liquidated, due - as is the case in many countries - to the high levels of public funds spent on the population, business and entrepreneurs during and immediately after the pandemic.”

Calls by EU politicians for Europe to divorce itself from U.S . payment systems such as Visa and Mastercard in light of recent geopolitical disputes are - in the near term, at least - “completely unrealistic,” Bialek said.

But the bloc could take a leaf out of Poland’s book, having developed its own popular parallel system.

“The process of creating a pan-European payment system would take years, although I personally believe that, rather than competing with Visa and Mastercard, the European Union should create something similar to the Polish BLIK system.”