After refusing to apply zero VAT to a basket of essential products for four months, echoing Spain’s example, the Portuguese government reversed course and announced on Monday that 44 products will no longer have VAT after the Easter holidays.
The list is drawn up by the Ministry of Health to ensure that tax incentives are not given to unhealthy products and is based on the best sellers in Portuguese supermarkets. The list of products without VAT includes: bread, potatoes, pasta, rice, onions, tomatoes, cauliflower, lettuce, broccoli, carrots, courgettes, leeks, pumpkins, spinach, turnips, a selection of fruits, beans, chickpeas, peas, beef Milk, yogurt, cheese, pork, chicken, turkey, beef, cod, sardines, hake, canned tuna, sea bream, mackerel, eggs, olive oil and butter, and more.
In mid-March, Finance Minister Fernando Medina assured that he did not consider the VAT reduction a priority measure “because of the results that have already been seen in the countries that have applied it”, but he changed his mind. . Last Friday, Medina spoke of an event that would be “effective” and that would extend to “products, not brands.” The tax cut program is worth 600 million euros to the state, Prime Minister Antonio Costa said on Monday.
In order to ensure that VAT cuts are not quickly absorbed by increasing margins, the government has reached an agreement with companies in the food production and distribution sector. The executive order promised to reduce taxation on consumer goods, and in return, companies would have to pass the reduction on to end consumers. Antonio Costa thanked the various parties for their efforts in the negotiations “it was not easy”. The tax cuts are expected to last for six months.
The announcement comes after a week of inspections of supermarkets across the country to uncover possible price manipulation by distributors has raised doubts about food distribution profit margins on some products. The Finance Minister was keen to say on Friday that during the tax cut period, the contract with manufacturers and food distributors “will be monitored”.
It is just one of the measures in a new anti-inflation package unveiled on a day when it was revealed that Portugal’s deficit for 2022 was 0.4%, compared to the government’s original forecast of 1.5%.
Monthly checks 30 euros
In addition to abolishing VAT on 44 products for six months, Portugal will give 742,000 public administration workers a 1% pay rise and increase the food subsidy for those workers by 80 cents, to six euros a day.
During 2023, monthly checks of €30 will also be delivered to more than a million Portuguese families with limited resources and beneficiaries of social benefits. The government calculates that this subsidy can help three million people belonging to economically vulnerable families: about one in three Portuguese. This support is supplemented by a new monthly check of 15 euros for each child of a socially vulnerable family.
There is also 140 million euros intended to support producers in the face of increased costs in agricultural production, in a program that the government has not yet explained.
This new package comes 200 days after the previous package which was introduced in September 2022. On that day, the government announced a one-off grant of €125 for people earning up to €2,700 a month, €50 each. for every child, including reducing VAT on electricity in 2023 and freezing public transport prices.
Although there is budgetary space for more measures, the Portuguese government wants to continue with the path of reducing the public debt, known as the “correct accounts policy”, which contains spending and limits public investment to balance the debt, which is 113.8% of GDP.
Source: El Diario