Consumption Taxes

Poland — Consumption Taxes

#36 out of 38 OECD countries

Score 37.4 / 100

What Factors into This Ranking: Explore the Subcomponents

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Rate

#2737.2

vs OECD median −8.1

Best: United States

If levied at the same rate and properly structured, a VAT and a retail sales tax will each raise approximately the same amount of revenue. Ideally, either a VAT or a sales tax should be levied at the standard rate on all final consumption (although they are implemented in slightly different ways). With a sufficiently broad consumption tax base, the tax rate can be relatively low. A VAT or retail sales tax with a low rate and neutral structure limits economic distortions while raising substantial revenue.

Read more about Consumption Tax Rate

However, many countries have consumption taxes that exempt certain goods and services from VAT or tax them at a reduced rate, requiring higher standard rates to raise sufficient revenue. If not neutrally structured, high tax rates create economic distortions by discouraging the purchase of highly taxed goods and services in favor of untaxed, lower-taxed, or self-provided goods and services.

Countries with lower consumption tax rates score better than those with higher tax rates, as lower rates do less to discourage economic activity and allow for more future consumption and investment.

Base

#3435.0

vs OECD median −22.9

Best: New Zealand

Ideally, either a VAT or a sales tax should be levied at a standard rate on all final consumption. In other words, consumption tax collections should be equal to the amount of final consumption in the economy times the rate of the sales tax or VAT. However, many countries’ consumption tax bases are far from this ideal. Many countries exempt certain goods and services from the VAT or tax them at a reduced rate, requiring a higher standard rate than would otherwise be necessary, or apply the tax to business inputs, increasing the cost of capital.

Read more about Consumption Tax Base

VAT/Sales Tax Exemption Threshold

Most OECD countries set exemption thresholds for their VATs/sales taxes. If a business is below a certain annual revenue threshold, it is not required to participate in the VAT system. This means that small businesses—unlike businesses above that threshold—do not collect VAT on their outputs sold to customers but also cannot receive a refund for VAT paid on business inputs. Although exempting very small businesses saves administrative and compliance costs, unnecessarily large thresholds create a distortion by favoring smaller businesses over larger ones. Countries receive better scores for lower thresholds.

Consumption Tax Base as a Percent of Total Consumption

One way to measure a country’s VAT base is the VAT revenue ratio. This ratio looks at the difference between the VAT revenue actually collected and collectible VAT revenue under a VAT that was applied at the standard rate on all final consumption. The difference in actual and potential VAT revenues is due to 1) policy choices to exempt certain goods and services from VAT or tax them at a reduced rate, and 2) lacking VAT compliance.

For example, if final consumption in a country is $100 and a country levies a 10 percent VAT on all goods and services, a pure base would raise $10. Revenue collection below $10 reflects either a high number of exemptions or reduced rates built into the tax code or low levels of compliance (or both). The base is measured as a ratio of the pure base collections to the actual collections. Countries with tax base ratios near 1—signifying a pure tax base—score better.

About Consumption Taxes

Consumption taxes are levied on individuals' purchases of goods and services. In the OECD and most of the world, the value-added tax (VAT) is the most common general consumption tax.

Most general consumption taxes either do not tax intermediate business inputs or allow a credit for taxes already paid on them, making them one of the most economically efficient means of raising tax revenue.

However, many countries define their tax base inefficiently. Most countries levy reduced tax rates and exempt certain goods and services from VAT, requiring them to levy higher standard tax rates to raise sufficient revenue. Some countries fail to properly exempt business inputs. For example, states in the United States often levy sales taxes on machinery and equipment.

A country’s consumption tax score is broken down into two subcategories: the tax rate and the tax base.

Explore Data

The tax rules behind Poland's consumption taxes score, as the Index appendix records them, with the OECD average for each.

Poland's consumption taxes variables in the 2026 Index, with the OECD average for each
Variable Poland OECD average
Rate
VAT/Sales Tax Rate 23.0% 19.4%
Base
VAT/Sales Tax Threshold (U.S. dollars, PPP) $121,855 (PLN 240,000) $55,980
VAT/Sales Tax Base as a Percent of Total Consumption 49.3% 55.3%

Source: 2026 International Tax Competitiveness Index, appendix tables.

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Alex Mengden Tax Foundation
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Alex Mengden

Economist

Alex Mengden is an Economist at the Tax Foundation, where he focuses on international tax issues and tax policy in Europe. He holds a BA in philosophy and economics from the University of Bayreuth and an MSc in economics from the Ludwig Maximilian University of Munich.

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Luis Zarka

Transatlantic Tax Fellow

Luis Zarka was a 2026 Transatlantic Tax Fellow with the Tax Foundation’s Center for Global Tax Policy.

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