On the second day of the specialized debate on the State Budget for 2026 (OE2026), where several proposed amendments related to the Fuel and Energy Products Tax (ISP) are voted on, the government’s intention to gradually eliminate the discount on this tax has caused a rift between the PS and PSD parties.
PS deputy Carlos Pereira stated that the government has left it “more or less clear” that the ISP discount is to be terminated, following the recommendation of the European Commission, indicating that “at any moment during the next year, any ordinance might appear transferring these millions of euros from the families’ pockets to public accounts” to secure the “outcome the government desires.”
To prevent this, the socialists want the parliament, not a government ordinance, to decide the fate of the funds resulting from the end of the ISP discount, advocating for this amount to be channeled towards reducing VAT on a set of essential food items.
In response, social-democrat deputy Adriana Rodrigues criticized PS’s “backflip,” highlighting that when PS was in government, it initiated the reduction of the discount it had implemented and originally labeled as temporary, and now, as the opposition party, “proposes that the additional revenue the government plans to obtain from ending the temporary ISP discount be allocated to reducing VAT on essential food items.”
“It is shamelessness,” she argued, further questioning the results achieved with the ‘zero VAT’ measure implemented by the socialist government led by António Costa to counteract the price increase of essential food items.
“The measure cost about 600 million euros, which, according to some critics like Mário Centeno, could have been spent on more effective solutions directed at the most vulnerable,” she asserted.
This afternoon, several proposed amendments to the State Budget regarding this tax are being voted on in committee, such as eliminating VAT incidence on ISP, proposed by Chega, the removal of the exemption on private aviation by Livre, the complete removal of ISP exemptions by PAN, in addition to the socialist proposal of allocating the tax revenue from eliminating this discount to a set of essential food items.
The Finance Minister has already assured that the elimination of the current ISP discount in 2026 will be done “as gradually as possible” to not affect the final fuel prices.
The elimination of the current ISP discount and the updating of the carbon rate would bring additional revenue to the state treasury of 1.132 billion euros, estimates the Public Finance Council (CFP).
