PS Wants Zero VAT on Food and a Fuel Tax Cut in 2027 Budget
Portugal's Socialists want a fuel tax cut and zero VAT on basic food, paid for by halting the IRC cut and ending moderate-rent tax breaks. What it means.
The Partido Socialista (PS, Portugal’s main center-left opposition party) wants the 2027 state budget to cut the tax on fuel and remove VAT from a basket of essential foods. To pay for both, the party proposes suspending the planned one-point cut in corporate income tax (IRC) and scrapping the tax incentives for so-called moderate rents.
PS parliamentary leader Eurico Brilhante Dias presented the plan at the party’s national headquarters in Lisbon, with deputies António Mendonça Mendes and Miguel Costa Matos. Reports differ on how many amendments the party will table: ECO counts 180, while RTP and Diário de Notícias say about 280.
What it means for fuel and grocery bills
On fuel, the PS wants a temporary reduction of the ISP (Imposto sobre os Produtos Petrolíferos, the tax on petroleum and energy products) equal to cutting VAT on fuel from 23% to 13%. The money would come from freezing the IRC cut planned for 2027, which the party puts at about 300 million euros. According to ECO, UTAO (parliament’s independent budget unit) estimates that cut at 400 million euros.
The party says this margin would cover the fuel discount in the first quarter. After that, Mendonça Mendes argued, inflation would push up tax revenue, so by April there would be enough to keep the discount going if it is still needed. He added that the carbon tax update already brings the state more than 150 million euros.
Zero VAT on the essential food basket returns from 2023, when, the PS says, the cut showed up in food prices. Revoking the moderate-rent incentives would fund it, a move the party values at 209 million euros. Like the fuel measure, it would apply for three months at first and then be reviewed.
The PS also wants future ISP increases to go through parliament instead of being set by ministerial order (portaria). Brilhante Dias accused the government of using the ISP to avoid admitting it raises taxes.
How the party says the numbers add up
ECO reports the full package costs 480 million euros but brings in 500 million euros, keeping the 0.1% budget margin the government wrote into its proposal. “The government has to make choices in the face of the rising cost of living,” Brilhante Dias said, according to ECO. He noted that banks would pay 180 million euros less in tax under the IRC cut.
Housing proposals for tenants and buyers
The housing chapter is aimed at tenants and buyers. The PS again wants a moratorium on all rental contracts that expire next year and a public rent guarantee built on rental insurance. It also wants to end tax privileges for non-residents, raise the IMT (property transfer tax) paid by non-residents and increase IMI (municipal property tax) on empty buildings.
After a meeting between Prime Minister Luís Montenegro and PS leader José Luís Carneiro, the government reportedly showed openness to exempting from IRS capital gains on the sale of second homes for up to 300 thousand euros. The PS wants a 50% exemption for sales between 300 and 500 thousand euros, if the home becomes the buyer’s permanent residence and sits in an area of urban pressure. The party also wants to end early-repayment fees for everyone paying down a mortgage; today only variable-rate borrowers are spared them.
Students, pensions and energy bills
- A freeze on university tuition fees at every level and a cap on master’s fees.
- Pay for mandatory curricular internships through a grant of 1.5 IAS, about 800 euros.
- Eight thousand new student residence beds and more psychologists in schools and universities.
- Social electricity and water tariffs for people on low incomes.
- Permanent pension bonuses and an extended Programa Regressar for emigrant pensioners, taxing only 50% of eligible income for ten years.
What happens next
The PS let the budget pass its first reading after the government met its four conditions. Brilhante Dias called it a “bad budget” but said the party will abstain on most government proposals in the detailed committee vote. The government has so far shown no openness to ending moderate rents.
Sources: ECO, RTP Notícias, Diário de Notícias
