The Portuguese government has introduced plans to exempt “essential” food items from its value-added tax (VAT) in response to the recent inflation spike. While the basket of “essential” goods is to be determined, Finance Minister Medina hopes the temporary policy—effective from April to October—will provide relief to consumers. While this may sound like a reasonable measure on the surface, it comes with numerous unintended consequences that compromise its effectiveness.
Source: taxfoundation.org
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