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Portugal’s Windfall Tax on Food Companies

Portugal’s Windfall Tax on Food Companies -
Portugal’s Windfall Tax on Food Companies - Portugal Business News

Following Davos 2023 and the call from Oxfam for a windfall tax on food companies, Portugal is highlighted as an example to be followed by other countries.

Towards the end of December 2022, Portugal’s parliament approved a 33% tax on the windfall gains of energy companies as well as food retailers in order to redistribute excess profits in an inflationary context. Under this regime, the share of profits of companies that exceeds 20% of average profits in the previous 4 years will be subject to a windfall tax. This new law enters into force in a context where one of Portugal’s largest retailers, Jerónimo Martins, registered a 29% rise in profits amidst soaring inflation, while the CPI index showed a rise of 9.9% YoY.

With this new windfall tax on food companies, Portugal goes beyond what is mandated by the EU as it also includes supermarkets. This is because, according to Prime Minister António Costa, food companies also need to pay for gains that are not justified in this context. This temporary measure will make it possible to channel support towards the most disadvantaged.

Portugal’s measures to combat hunger are highlighted by Oxfam while the organization is calling for “an end to this crisis profiteering.” They add that food and energy prices are dominated by a small number of players and the lack of competition allows them to keep prices high.

Oxfam made an urgent plea to Davos participants to follow Portugal’s example. They stated that at least one country had already taken action as Portugal’s windfall tax on major food retailers came into effect in January 2023 and is to be in force throughout the year.

Oxfam stated that their analysis of 95 major companies showed that 84% of windfall gains were paid to shareholders while higher prices were passed onto consumers. While the WEF was held in Davos, Oxfam reported that at least 1.7 billion workers live in countries where inflation is outpacing their wage growth. This happened in a context when the world’s 1% super-rich gained nearly twice the amount of wealth produced by the 99%.

Tax affairs chief at Portugal’s Finance Ministry, Nuno Felix, stated that this temporary tax was approved by the Government because “there has to be social justice.”


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