Parliament Unanimously Approves Emergency Fuel Tax Cut — ISP Floor Lowered Through June 30
All parties voted in favour of lowering the legal floor on Portugal's fuel excise tax, allowing the government to cut ISP on petrol to 20 cents and diesel to 16 cents per litre through June 30 — as diesel hits record highs amid the Middle East crisis.
Portugal's parliament voted unanimously on Wednesday to lower the legal floor on the country's fuel excise tax, giving the government expanded room to cushion consumers against record pump prices driven by the Middle East conflict.
The fast-tracked bill — approved by the Council of Ministers on Monday, submitted to parliament on Tuesday, and passed in a single combined vote on Wednesday — allows the government to reduce the Imposto sobre Produtos Petrolíferos (ISP) on petrol to as low as 20 cents per litre, down from the previous legal minimum of 36 cents. For diesel, the new floor drops to 16 cents per litre, from 33 cents. The measure expires on 30 June 2026.
Current discounts already below EU minimums
Portugal has already been operating below the EU's recommended minimum excise rates as an emergency measure. According to the Secretary of State for Tax Affairs, who presented the bill in parliament, the government currently applies a discount of approximately 21 cents per litre on diesel and 19 cents on petrol. The effective ISP rates stand at around 28 cents for diesel and 45 cents for petrol.
However, because the diesel rate had already dropped below the previous statutory minimum, the government needed parliament to formally lower the floor — or risk operating outside its own legal framework. The urgency was compounded by the possibility that further pump price increases could require even deeper cuts in the coming weeks.
All parties back the move, but with caveats
The unanimous vote masked significant disagreements over the broader approach to the fuel crisis. Left-wing parties, including the PS and Bloco de Esquerda, supported the measure but criticised the government for relying exclusively on tax cuts rather than addressing what they see as excessive profit margins in the fuel supply chain. Several opposition deputies argued that ISP reductions benefit oil companies as much as consumers if retail margins are not regulated.
The PSD-led government defended the approach as the fastest and most direct way to provide relief, noting that EU rules permit temporary derogations from minimum excise rates during energy crises, provided the measures are proportional and time-limited.
Context: diesel hit a record €2 per litre
The vote comes after Portuguese diesel prices crossed the symbolic €2-per-litre mark at all major fuel chains last week — a new all-time record driven by the spike in global oil prices following the disruption of shipping through the Strait of Hormuz. While a two-week ceasefire between the United States and Iran announced on 7 April has since sent Brent crude tumbling 13.7 per cent to around USD 94 per barrel, fuel retailers say it may take until next week for lower wholesale prices to filter through to the pumps.
The approved bill will now be sent to President António José Seguro at Belém for promulgation. Given the urgency request attached to the legislation, the presidential signature is expected within days.
Related: Gas bottle prices in Portugal jumped 20% in April as retailers demand an emergency VAT cut