Lisbon, Sept. 18, 2026 (Lusa) — The government will propose to parliament that the temporary scheme reducing fuel tax rates on petrol and diesel be extended until 31 December to offset the additional VAT revenue from the rise in fuel prices.
The extension maintains flexibility, enabling the government to continue temporarily adjusting the Tax on Petroleum and Energy Products (ISP) in line with price movements.
The scheme provides for a reduction in the ISP when the increase in petrol and diesel prices exceeds 10 cents per litre compared with the reference figures for the week of 2–6 March, taken as the baseline following the outbreak of the conflict in Iran on 28 February.
In a statement to the nation after the cabinet meeting, Prime Minister Luís Montenegro said the discounts currently in force amount to «around 23 cents per litre of fuel» and acknowledged they could rise to around 25 cents as early as next week.
«Since March, we have been reducing the tax in order to refund everyone the excess VAT charged due to the rise in prices,» he said.
According to Montenegro, with the government's tax cuts, petrol currently costs around €2.30 per litre and diesel about €2.40.
«The state gains nothing,» the prime minister said, arguing that the increase in VAT revenue from higher prices is being offset by the reduction in the ISP.
Montenegro estimated that the ISP cuts represent a reduction in taxation of around €1.3 billion by year-end.
The head of government maintained that the government would avoid further reducing fuel taxes through measures that could increase the deficit or public debt.
«I will not trade any more cents of ISP discount for more taxes, for a bigger deficit, or for more debt that we would have to pay off in the future,» he stated.
The government's decision to maintain the reduction in the tax burden via the ISP comes as the PS and Chega have been calling for a cut in VAT on fuel.
The prime minister said that the response to rising fuel prices must balance «social sensitivity with financial responsibility» and favoured a coordinated approach over what he described as an «auction of isolated and uncoordinated measures».
The government adopted a mechanism to reduce the ISP following the rise in fuel prices linked to the crisis in the Middle East, allowing it to periodically review the rates applicable to petrol and diesel.
The cabinet also approved on Thursday a €38 million package of extraordinary support for the sectors most affected by the rise in fuel prices, including freight and passenger transport, taxis, the fire service and organisations in the social sector.
SCR/ADB // ADB.
Lusa
