It is a matter of fiscal justice and alignment with tariffs in the rest of Europe. The National Association of Food Traders and Industrialists (Ancipa) is calling for a reduction in the VAT rate applied to ready-to-eat food products purchased in grocery stores and supermarkets from 23% to 6%. This demand from the sector is not new, but now has the support of the Confederação Empresarial de Portugal (CIP), which defends the 6% VAT on all food products in Portugal, a proposal that will be included in the “Social Pact” that the bosses join UGT, and they will present that to the government in September. According to an advice that Ancipa has asked Deloitte consultancy, the reduction of the minimum VAT rate on processed foods would lead to a loss of tax revenue of about 110 million euros. The calculations are based on the VAT revenue collected by the State in 2022.
According to calculations by Deloitte, ready meals, frozen ready meals, refrigerated pasta, refrigerated meals and products with refrigerated components represented a VAT inflow of more than 126 million euros for the State last year. At 6% VAT, 32.9 million euros would enter the state coffers. “It should be noted that the study found about 80% of the VAT paid in 2022, so if we extrapolate the values to 100%, the value of VAT that will have been paid in mainland Portugal in 2022, at the rate of 23%, when the goods in question were shipped to end customers, would have stood at 150 million euros,” says Deloitte’s opinion, made available by CIP. In other words, the consultant adds, “if the reduced VAT rate had been applied, for the same volume of sales (assuming inelastic demand), the turnover would have been close to €40 million. This would result in a decrease in VAT paid in the order of 110 million euros per year”.
The opinion also says that the tax loss could be even smaller, as “the calculations presented are based on an inelastic demand for the said products, which is very unlikely, as far as an effective reduction in the consumer’s paying the price (e.g. through the application of a lower VAT rate), can (and should) mean an increase in demand for these products – thus offsetting a possible reduction in the related VAT paid”.
With this advice, the CIP will try to convince the government to include the measure in the proposed national budget for next year. “The 23% VAT treats food as a luxury good. I think maybe with this information, with this rigor, with this focus that the CIP needs to put on this matter, the government, the finance minister and the prime minister, stay alert and be aware are at least aware, this time in detail, of the concern that CIP entails,” says Vivo Manuel Tarré, director of CIP on behalf of associations such as Ancipa and ALIF – Association of the Industry for the Cold and Trade of Foods.
The sector argues that the eating habits of the population have changed and that there are more and more Portuguese, many of whom are the elderly, young students and displaced workers, who are resorting to ready-to-eat food. And it doesn’t accept that a meal bought from a takeaway restaurant pays 13% VAT (the rate applied in catering), while when bought in a supermarket it pays 23%.
“Some young people do not know how to prepare food, it becomes easier to buy ready-made meals and there are many elderly people in Portugal with limited mobility who sometimes have difficulty handling food and here they have another opportunity. And there’s no doubt about it, it goes to the most disadvantaged, who earn the least, have very low pensions. A 17 percentage point cut on processed food helps a lot of people,” defends Manuel Tarré.
He further emphasizes: “restaurants have a 13% tariff and only a portion of the Portuguese have access to restaurants. Those who don’t, pay 23% on processed products. There is something not so good about all of this”.
Join Europe
Another argument of the bosses to defend that all foodstuffs in Portugal only have to pay 6% VAT are the rates that apply in other European countries. For example, according to CIP data, biscuits and cereals pay 23% tax here, while in Spain and Italy they pay 10%, in Germany 7%, in Belgium 6%, in France 5.5% and in the UK 5%. Or pastry or confectionery, such as rissol or pastel de nata. In Portugal they pay 23% VAT, in Spain 4%, and in Germany, France and the United Kingdom the rate is the same as for other food products, 7%, 5.5% and 5% respectively.
“It cannot be accepted as normal that buying a sausage or a codfish pie is taxed at 23%. These goods are not for people with great purchasing power, but for people with a low salary,” notes Manuel Tarré. “If we have the highest taxes on food in all of Europe, about three times more on processed products, that’s a perfectly valid claim,” he argues.
Source: DN
