Portugal to scrap VAT on essential foods and boost producer support in new anti-inflation deal

Portugal is removing VAT from the price of basic food items and increasing support for producers, to help consumers and manufacturers cope with the growing inflation and interest rates.

The government signed the deal with the Portuguese Association of Distribution Companies (APED), and the Confederation of Portuguese Farmers (CAP) to put the new measures into play.

The project will cost the government around €600 million, Portugal’s prime minister António Costa said in a statement, and its impact will be monitored over a six month period.

Retailers are still in discussions with the government to decide which foods are deemed ‘essential’ enough to be VAT-free.

Food producers struggling with the high prices of fertilisers, feed and energy will also receive more support under the new agreement.

The new measures are part of the country’s broader anti-inflation package worth €2.5 billion. In a statement, the Finance Minister Fernando Medina said the aid package will help around a million Portuguese families.

Overall inflation in Portugal reached 8.2% year-on-year in February, but food prices have continued to shoot up, with the cost of fresh fruit and vegetables having increased by 20.11%.

Meanwhile in the UK, grocery price inflation reached a new record high of 17.5% in March, which adds around £837 to an average household’s annual bill, according to data from Kantar. This now marks the ninth month that consumers have faced double digit inflation on grocery goods.

Prices of cheese, eggs and milk have been increasing the fastest, and as a result of worry around product shortages, the volumes of tomatoes, peppers and cucumbers being purchased at independent stores went up by 32%, 26% and 21% respectively.

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