Reducing VAT on restaurants would be a “bad economic policy decision”, said the Minister of Finance, Joaquim Miranda Sarmento, this Friday, October 24, at a hearing at the Budget, Finance and Public Administration Committee of the Assembly of the Republic, to assess the proposed State Budget for 2026 (OE2026).
Miranda Sarmento was speaking about a proposal from Chega to reduce VAT on restaurants, which, argued deputy Pedro Pinto, “generates more jobs” and means that “employees are better paid”. “Are you going to accept this proposal from Chega to lower the VAT on restaurants?” asked the Chega deputy, who in his program for the last legislative elections proposed “to standardize the VAT rate at 6% for all restaurant services”.
VAT rates of 23% for soft drinks and alcoholic drinks and 13% for food are currently in force in restaurants, with menus being able to have both rates, depending on how they detail their composition.
“Regarding VAT on restaurants, the reduction from 23% to 13% costs one billion euros. Do you think that taxpayers in general should give a tax benefit to a specific sector of one billion euros?”, asked the Minister of Finance.
This year, a report from the Technical Unit for the Assessment of Tax and Customs Policies (U-Tax) recommended to the Government that restaurants should once again have VAT on all their services at 23%, which would reduce tax expenditure by one billion euros. The State Budget proposal for 2026 does not change the VAT on restaurants (that is, it does not return the rate to 23%, nor does it accept Chega’s idea of “standardizing” the taxation of this sector at the reduced rate of 6%).
“To give you an idea, one billion euros was the cost of the Government’s initial proposal for IRS Jovem, it meant giving all young people a reduction in IRS to a third of what they paid before,” he said.
“One billion could mean reducing three percentage points in the IRC rate”, which would apply to “all companies in all sectors”, he exemplified. “One billion euros would allow a reduction of one percentage point in the normal VAT rate or two percentage points in the reduced rate”, he continued, which would allow the Government to “make a reduction in all or almost all goods and services”.
Also in response to Chega’s deputy regarding the reinstatement of the full collection of the Tax on Petroleum Products (ISP), he acknowledged that “there is an obligation, from the European Commission’s point of view, to reverse the temporary discount that was created in 2022” at the start of the war in Ukraine. After the inflationary outbreak, the Commission has been putting pressure on countries that maintain discount mechanisms on the price of fossil fuels, having done so again in the summer of this year.
Miranda Sarmento said that the Government will “within what is possible, and by accommodating the production of fuel prices, reverse this discount”. In other words, the objective is to “protect the price of fuel at the gas pump”.
The reversal of the ISP discount, the minister insisted, “will always be as gradual as possible, so as not to have an impact on the final price of gasoline and diesel”.
Also in response to criticism from Chega deputy Eduardo Teixeira about the increase in tax revenue foreseen in OE2026 (“the Portuguese will abruptly pay more taxes, despite there being no rate increases there is a brutal increase in collection”, he said), Miranda Sarmento recalled that “there is no increase in tax rates, so the growth in tax revenue results from economic activity and the increase in nominal GDP”.
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