Indirect taxes hit 5-year high

What Portugal’s government is giving in tax cuts for companies and families in one hand, it is taking in indirect taxes with the other as tax revenues from VAT and other taxes will hit a maximum five-year high in the State Budget for 2026.

The government plans to continue to increase the burden of indirect taxes in a tendency seen since 2024 when Luís Montenegro took up his post as Portugal’s prime minister.

According to the newspaper Público and forecasts for tax revenues for 2025 and 2026 included in the State Budget for 2026, the indirect tax burden will equal the 53.5% seen in 2021 for 2026.

Indirect taxes accounted for 52.1% in 2024 and are expected to end this year at 52.9%. The same data cited by the publication points to a 4.8% increase in direct taxes payable by taxpayers and companies for 2025, while indirect taxes are expected to grow by 8.4%, with next year’s increases expected to be 2.6% and 5.1%, respectively.

Economists quoted by Público explain that successive governments have opted for “fiscal anesthesia” by raising indirect taxes, since these are less felt by citizens. Last year alone, VAT, the main indirect tax and the State’s main source of tax revenue, yielded close to €24.2Bn to the central administration, representing almost 72% of tax revenue through this type of tax.

Indirect taxes have accounted for more than 50% of tax revenue since 2015, the newspaper also points out, with a peak of 54.5% being reached in 2019, when Mário Centeno was in charge of Portugal’s Ministry of Finances.

epa12441832 Portuguese Finance Minister Joaquim Miranda Sarmento attends a press conference on the proposal for the State Budget 2026 (OE2026) at the Hall of the Ministry of Finance in Lisbon, Portugal, 09 October 2025. EPA/JOSE SENA GOULAO
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