Portugal's finance minister says cutting VAT on food not a priority
14/03/2023 15:55
By Sergio Goncalves
LISBON, March 14 (Reuters) - Portugal has no intention
of lowering the 6% value-added tax (VAT) levied on basic food
products, but will continue to grant direct subsidies to help
the most vulnerable families cope with rising prices, Finance
Minister Fernando Medina said on Tuesday.
Speaking to reporters in Brussels following a meeting of the
European Union's finance ministers, Medina said his government
had been subsidising the poorest families, which spend a larger
part of their budget on basic food products and has also
increased the minimum wage and social benefits in 2023.
"This has always been our priority and it will continue to
be during 2023: reinforce the income of the most vulnerable
families and concentrate our efforts there," he said in a
statement aired by public broadcaster RTP.
"We do not consider the reduction of VAT (on basic food
products) a priority," Medina added.
Opposition politicians and activists have criticised the
government for focusing on cutting the deficit, instead of
redistributing higher tax revenues as prices have risen among
more vulnerable families and businesses.
Portuguese consumer prices rose 8.2% year-on-year in
February, a slowdown from the 8.4% reported in the previous
month. But core inflation, which strips out volatile food and
energy prices, clocked in at 7.2% year-on-year, up from 7.0% in
January.
Putting pressure on core inflation is the rise in prices of
unprocessed food products, such as fruit and vegetables, which
surged 20.11% year-on-year in February, while energy products
rose only 1.96%.
Medina said that the food and economic security authority
ASAE was investigating the profit margins of large food
retailers, such as Jeronimo Martins JMT.LS and Sonae YSO.LS ,
"which will tend to mitigate these price increases".
In mainland Portugal, basic food items such as rice, pasta,
bread, milk, dairy products, meat, fish, and fruits and
vegetables carry a minimum VAT rate of 6%. Other food products
and beverages are taxed at either 13% or 23%.
In December, EU finance ministers gave governments more
flexibility regarding the VAT rates they can apply to goods and
services.
In December, Spain exempted some basic food products - such
as bread, milk, cheese, eggs, fruit, vegetables, legumes,
potatoes and cereals - from VAT for six months and reduced the
rate on foods such as olive oil and pasta to 5% from 10%.
(Reporting by Sergio Goncalves; Editing by David Latona and
Sharon Singleton)
((sergio.goncalves@thomsonreuters.com; +351213509204; Reuters
Messaging: sergio.goncalves.reuters.com@reuters.net))