Portugal approves draft windfall tax on oil firms

Portugal’s government approved a draft law Thursday to launch a temporary tax on windfall profits earned by oil firms as fuel prices rise after the Middle East war.

The government said the revenue would support families and sectors most affected by fuel price increases. It said the money would also help finance investments to decarbonise the economy.

The draft law must now be submitted to parliament.

Portugal had joined Austria, Germany, Italy and Spain in calling for a windfall profits tax on oil firms. The countries noted that similar taxes were introduced in 2022 when energy prices rose after Russia’s invasion of Ukraine.

Finance Minister Joaquim Miranda Sarmento said in May that he had received European Commission approval to introduce a temporary windfall tax, as Portugal had done in 2022. Portugal has also reduced taxes on diesel and petrol to cushion the impact of higher pump prices.