The removal of the current discount on the ISP and the update of the carbon tax would bring an additional revenue of 1.132 billion euros to the state coffers, estimates the Public Finance Council (CFP).
In the analysis report of the proposed State Budget for 2026 (OE2026), the CFP estimates the impact of the elimination of the current discount on the Tax on Petroleum and Energy Products (ISP). The report concludes that the direct annual impact of the expected revenue increase from the full update of the ISP rates on January 1, 2026, could amount to 873 million euros.
Furthermore, according to the CFP’s projections, updating the carbon tax in 2026 would lead to an increase in tax revenue of 47 million euros. “In addition to these two components, which are integral parts of the price of petroleum products, there would be an additional VAT revenue of 212 million euros, arising from the fact that this tax is applied to all components that form its price,” the entity notes.
Thus, the potential for increased tax revenue resulting from the termination of the ISP discount and the update of the carbon tax for the year 2026 “would result in an additional revenue gain of 1.132 billion euros (0.4% of GDP), if the reversal of these measures proceeded at the beginning of the next year and fully,” concludes the CFP.
This exercise arose due to the European Commission’s recommendations for a reduction in these discounts, as they are exceptional measures aimed at mitigating the impact of rising fuel prices.
However, the Government did not include any forecast for the elimination of these discounts in the OE2026 proposal and has already indicated that the process should be gradual.
The Minister of Finance, Joaquim Miranda Sarmento, assured that the executive is working on a solution that does not increase fuel prices, pointing out that they will look for “moments of price reduction, to be able to reverse these discounts.”
