LITTLE BENEFIT has come to public consumers from the reduction of the highest band of VAT (IVA) in Portugal, which reduced from 21 per cent to 20 per cent on Monday.
Consumers have not benefitted greatly from the tax reduction because the VAT on many essential goods and services such as water, electricity, gas, medicines and many foods, among others, only have five per cent VAT.
The greatest price reductions since the new tax band was applied have been registered in the price of diesel, petrol and vehicles.
In a statement release on Sunday, the Portuguese food distribution group, Sonae, said that the one per cent reduction in VAT will directly affect the price of around 50,000 items. Products which have the maximum tax include perfumes, tobacco, alcohol and clothing, among others.
This reduction, in VAT, which was announced by the Prime Minister, José Socrates in March and approved in parliament in May, is expected to reduce government revenue by 250 million euros.
Although this reduction has brought the Portuguese VAT rate closer to that of Spain, where this tax is fixed at 16 per cent, it goes against recent recommendations made by the EU Commission and Vitor Constâncio, the governor of the Bank of Portugal.
Do you have a view on this story? Email: editor@the-resident.com
