The end of zero VAT on a limited selection of food products is expected to last a week longer than expected, to give food retail operators time to adjust to the recovery in prices with the tax. The measure officially ends on December 31, but the Portuguese Association of Distribution Companies (APED) has asked the government to extend it and for the new prices to come into effect on January 10, 2024.
“The government was sensitive to our arguments that on January 2 we would not be in a position to have our operations and people with the capacity to replace VAT on more than 7,000 products,” said the APED general manager. Gonçalo Lobo Xavier explains that during the last meeting of the monitoring committee for the zero VAT pact, attended by the Secretaries of State for Agriculture, Trade and the Deputy Prime Minister, the topic was discussed and “they were sensitive to the arguments presented “.
The legal instrument to be used remains to be clarified. APED proposed to include the extension of the measure for another nine days in the 2024 state budget, but the government did not want this and was left to analyze the procedural issue, which could include, for example, an addendum to the measure . the diploma that introduced zero VAT.
“There are nine crucial days for us to prepare all the replacements of prizes on the shelves and in the computer systems,” says Lobo Xavier, who speaks of a “matter of practical nature and respect for employees”, since the logistics operation that associated with the change is “huge and complex”, especially in the period after Christmas and New Year, when new price tables also come into effect. Remember that at the beginning of the measure it was necessary to give operators time to prepare. For this reason, the pact for the stabilization and reduction of food prices was signed between the government and the agricultural and distribution sector on March 27, but zero VAT did not formally enter into force in all stores in Portugal until April 18.
Regarding the prices in force in 2024, the Director General of APED assumes that the pressure is “great” and that they “could increase significantly”, but refuses to “risk their size” . “Fortunately, inflation is falling, but there are markets that are still under great pressure, namely grains, some fresh, such as eggs and beef and chicken, in short everything that has more to do with animal feed,” refers.
Since it is not possible to extend zero VAT, a measure it defended because it believed it had “positive effects on family budgets”, APED believes that it would be important for the next government of the would take the opportunity to consider the different VAT levels and rates, evaluating their effectiveness and possible harmonization compared to, for example, Spain. For the association, it makes no sense that some food products are still subject to the maximum VAT rate, as is the case for some canned goods, but not only That.
“We want to initiate a debate and reflection on, in a first analysis, the reorganization of products at different levels and, in a second phase, lowering the levels or restructuring them to adapt them to a fairer reality for the citizens,” he argues.
A change that was also requested by Centromarca, the association representing manufacturers of branded products. “You only have to analyze the VAT code to understand that it is a patchwork that makes no sense and that today represents more of a confusion than a solution. It was important at this time to take advantage of the end of zero VAT to introduce this tax in a harmonized form for all food products, which would make life easier for everyone and even for the state itself,” argues Pedro Pimentel.
With or without a deeper change, as requested by CIP and representatives of the agri-food industry, Centromarca’s general manager recalls that the end of zero VAT will immediately “generate an increase in the inflation rate of at least one percent.” percentage point.”
This at a time when data on retail sales in the food sector indicates “some stabilization of the impact of inflation, which, although persistent, is starting to feel increasingly controlled in the food sector”, he argues.
And Nielsen data proves him right. The latest ones cover September and show that food retail sales grew 12.8% year-on-year in the first nine months of the year to a total of €10,298 million. That is 1,165 million euros more than last year.
In a more detailed analysis, we realize that the increase in turnover, in value, in the food trade remained in double digits almost all year round, but has been slowing down since June. In other words, growth peaked at 16.9% in February and approached again in April/May, growing at 16.4% year-on-year, but falling to 13% in May/June and to 11.5% in June/July. Since then it has remained around 10%. Nielsen Scantrends analysis is conducted over four weeks, meaning the data sometimes spans half of one month and the next.
Sales growth, in value terms, is cross-cutting across all types of products, with a special emphasis on food. Of the 10,298 million left by the Portuguese in supermarkets and hypermarkets, 4,140 million went to groceries, 1,823 million to dairy products and 803 million to frozen products. A year ago, families spent a total of 9,133 million euros, of which 3,635 million on groceries, 1,553 million on dairy products and 703 million on frozen products. Distribution brands, so-called white label products, currently account for 44.4% of the total value of food retail, compared to 40.1% a year ago.
Ilídia Pinto is a journalist for Dinheiro Vivo
Source: DN
