According to an official source from the Socialist Party (PS), the permanent zero VAT could amount to approximately 500 million euros per year. This is among the most budget-impacting measures proposed by the party for the May 18 elections.
In its electoral program, the PS states its aim to “ensure families the return – now in a permanent manner – of zero VAT on food, through a basket of food items that is continuously monitored to ensure that distribution profit margins do not absorb the gains for consumers.”
Consequently, the goal is to monitor prices, with the food items included in the basket potentially varying based on the country’s economic situation. For example, in a context of combating inflation, one set of products might be prioritized, while another might be during normal conditions, an official from PS explained.
The PS secretary-general defended this measure today, arguing that the zero VAT initiative was successful in reducing prices, despite doubts raised during its implementation.
“It is very important that we, with the budgetary margin the State has available, do what is within our power to reduce the cost of living for our families,” stated Pedro Nuno Santos during a visit to the Benfica Market.
The zero VAT was temporarily implemented by António Costa’s government due to inflation, running from April 18, 2023, to January 4, 2024, covering a basket of 46 essential products exempt from VAT.
The inflation rate is now more controlled, estimated by the National Institute of Statistics (INE) at 1.9% in March. However, it could accelerate again if tariffs imposed by the United States trigger a new wave of inflation.
The PS has also prepared measures to respond to the impacts of these tariffs, which include tax credits for exporting companies, with the possibility of reallocating funds to this category, according to an official source.
