Gradual reversal of the ISP discount to raise around €200 million a year

Gradual reversal of the ISP discount

The gradual reduction of the discount on ISP (Tax on Petroleum and Energy Products), announced in December, is set to deliver roughly €200 million a year to the state.

That figure was given by the Minister of State and Finance, Joaquim Miranda Sarmento, during a scheduled hearing at the Committee on Budget, Finance and Public Administration. “The reversal of the ISP discount decided at the beginning of December represents around €200 million in revenue,” he said.

Government estimates and the alternative scenario

Until now, the Government had not published an official estimate for this measure. If the Ministry of Finance chose to remove the discounts in full straight away-rather than the step-by-step approach followed since the first Government led by Luís Montenegro-the annual rise in ISP tax revenue could be €1 billion higher.

That figure had already been mentioned in 2023 by the then Prime Minister, António Costa, while he was still in office.

Updates to petrol and diesel rates, and why they are being phased out

In December last year, the Executive proceeded with an “update of the unit rates of ISP on petrol and diesel”, starting a gradual rollback of temporary measures introduced during the energy crisis.

According to the Government, the cutback will happen progressively and will be linked to movements in the oil price, with the aim of softening the impact on the pump price paid by consumers as the discounts come to an end.

The move also follows pressure from Brussels, which has been calling on Portugal to bring these supports to a close. The Energy Services Regulatory Authority (ERSE) notes that the successive reductions in ISP amounted to a cut of 13.2 cents per litre on petrol and 11.7 cents per litre on diesel. As the discount is gradually removed, those amounts will be reapplied, plus the VAT that is charged on the final price of fuels.