Portugal will temporarily remove the value-added tax (VAT) on 44 essential goods to mitigate the cost-of-living crisis. In 2022, inflation
Portugal will temporarily remove the value-added tax (VAT) on 44 essential goods to mitigate the cost-of-living crisis.
In 2022, inflation in Portugal reached 7.8% , the highest level in the past 30 years. By March of 2023, energy prices were 4.4% lower year-on-year, when oil and gas prices escalated following Russia’s invasion of Ukraine. However, unprocessed food prices spiked by 19.3%. To help curb high food costs, the 6% VAT will be removed from items including milk, bread, rice, tomatoes, and certain meats and fish.
The VAT suspension would last from April to October. As a result, Finance Minister Fernando Medina expects inflation to decrease by a more significant amount in April and for the trend to continue in the ensuing months. The government predicts that average annual inflation will decrease to 4% this year, though the European Commission estimates a 5.4% forecast for the country.
Despite these estimations, many Portuguese citizens believe scrapping the VAT on basic food products is too insignificant to meaningfully ease their financial burdens. While the government recently increased subsidies to benefit poorer families, the VAT measure is the only one to address the cost-of-living crisis nationwide. Consequently, citizens are urging the government to increase salaries and pensions.