The government expects diesel to fall by 17 cents a liter next week and gasoline to fall by 13 cents.
Although these cuts represent a loss in the collection of value-added tax, the Ministry of Finance says in a statement that it will not increase the oil tax.
“For the coming week, with fuel prices falling by about 17 cents per liter of diesel and 13 cents per liter of gasoline, this should lead to a reduction in VAT revenue that It would adjust ISP unit rates of 2.6 cents for diesel and 2 cents for gasolineAccording to the weekly mechanism for reviewing unit price values,” the Ministry of Finance explained in a statement.
“In view of the uncertain circumstances of the development of circumstances (…) the corresponding ISP will not be updated this week, while maintaining the temporary ISP discountThe Ministry’s office discloses in the memorandum sent to the editorial rooms.
In this way, “the ISP’s temporary deduction of 3.4 cents per liter for diesel and 3.7 cents per liter for gasoline is maintained, with the formula applied again next week with corresponding adjustments.”
With this formula, “the government seeks to ensure fiscal neutrality for the rise in fuel prices, and to return the additional revenue collected from the value-added tax through the reduction of the Internet service provider,” says the Ministry of Finance.
Implementing this mechanism means that in the week when fuel sales prices fall to the public – as will happen next week – the ISP rate rises to offset the drop in VAT.
The price of the product itself, in which the government does not interfere, ISP (fixed amount) and VAT, which are levied on the sum of these two amounts and whose value increases when the base rises.
The government’s decision, which it announced today, not to provide this compensation next week, is caused by the instability of market development, and also by the lack of response from Brussels, and specifically regarding the request made by Portugal for a temporary and exceptional cut in the price. Value added tax applicable to the sale of fuel.
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