Portugal extends VAT holiday on “essential” food products

Minister of the Presidency Mariana Vieira da Silva disclosed on September 7th that a tax holiday has been enacted, encompassing 46 everyday food items, ranging from fruits and vegetables to a variety of meat, fish, dairy, and bread products. This extension of the VAT exemption received approval from the Council of Ministers.

Per an official government statement, the initial phase of zero VAT yielded nearly a 10% reduction in consumer prices during the period spanning from April 17th to August 28th. Minister da Silva expressed her satisfaction with this VAT initiative during a subsequent press conference, characterizing it as a \”successful\” measure that effectively and proportionally reduced the cost of essential and healthful food items. The evaluation of its impact was conducted by Portugal\’s Economic and Food Safety Authority (ASAE).

She also pointed out the favorable effect on Portugal\’s food inflation, which decreased to 7.3% in August from 8.6%, marking a significant slowdown compared to the 15.4% rate observed prior to the introduction of zero VAT in April. Nevertheless, da Silva acknowledged that price increases still exceeded their medium-term objectives, prompting the decision to extend the tax relief until the end of the year.

The statement underscored that \”Zero VAT\” materialized as a result of a three-way agreement inked between the government and the food production and distribution sectors. Its primary objective is to counteract the adverse impacts of inflation on family income. The selection of the 46 products was determined based on the Ministry of Health\’s criteria for a healthy food basket and insights from distribution companies regarding the most frequently consumed products in Portugal.

Significantly, other European nations, like France, have also taken measures to tackle elevated food costs, including arrangements with producers to freeze or reduce prices on a range of commodities, including food. Hungary, following a similar path, introduced a pricing regulation program last year, which was subsequently replaced in June by an alternative scheme that raised the mandatory discounts levy from 10% to 15%, encompassing a selection of 20 food items.

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