Green light for billion euro “lake city”

Cost of living goes up

by CHRIS GRAEME [email protected]

For millions living in Portugal, the New Year was the moment of truth as tax hikes on essential goods and services rose.

Household electricity bills had already risen in October but will go up again in the first quarter of this year.

The average household’s monthly electricity bill of €50 will suffer a €1.75 increase. Gas and water costs will also increase but the latter will vary according to each municipality.

The price of foodstuffs, too, has risen. Bottled water went up from 6% to 13% on January 1 while products like frozen potato chips, fizzy drinks, coffee, jams and preserves, margarine, cooking oils and other frozen products went up from 13% to 23%.

In cafés, the price of an expresso or bica will be between five and 10 cents more while smokers and drinkers will also be hard hit in the pocket.

Taxes on tobacco climb 4.6% and alcoholic drinks increased by 2.3%.

And for those eating out in restaurants, some diners are feeling the pinch as VAT climbs to 23%, although some establishments said they would not pass on the rising costs of lunches and dinners to avoid losing customers.

“In the vast majority of cases, catering establishments cannot pass on the costs to customers because they are already cutting back on eating out since the purchasing power of most Portuguese is already low,” said Mário Gonçalves from the restaurants, hotels and cafes association AHRESP (Associação de Hotelaria, Restauração e Similares de Portugal).

“We’re living in times of a free pricing policy whereby catering establishment owners can put up their prices or not; only most won’t be able to in reality,” he added.

The price of bread is also expected to rise because of rising flour and wheat costs, although the exact amount is not yet known.

The cost of transport, which already went up last year, will go up again from February by a so-far undetermined amount.

Changes to the rental laws mean that landlords can charge an extra 3.2% for new contracts and up to 5% for pre-existing ones.

Sporting activities and cultural shows too haven’t escaped the taxman; tickets to see sports activities like football matches or concerts went up from 6% to the maximum of 23% VAT.

However, football clubs are not expected to pass on the costs to fans, preferring to reduce their margins rather than lose numbers through the turnstiles.

And as reported by the Algarve Resident before Christmas, it will cost motorists more to use the country’s roads as tolls increase by around 4.36% on existing roads while tolls came into force on previously toll-free SCUT roads.

The good news on an otherwise bleak horizon of price hikes was the fact that many medicines were reduced in price from this month.

From January 3, the cost of pharmaceuticals became cheaper for patients as agreements were reached with drug companies, distributors and pharmacies to reduce their profit margins.

Under the terms of a new agreement, the cost of generics or white label drugs corresponds to 50% of the full price for non-generic medicines.

VAT rise

Rates from January 1 2012

From 6% to 13%

Mineral water

Fizzy water

From 6% to 23%

Flavoured mineral water

Flavoured fizzy water

Tonic water

Concentrate/Powdered drinks



Iced tea

Peeled potatoes

Frozen, fried and mashed potatoes

All milk based drinks and desserts

(except chocolate milk)

Cultural and sport events, concerts, cinema tickets

From 13% to 23%

Tinned foods

Jams and preserves


Baby food

(except baby formula)

Frozen meals and pizzas

Ready-made meals



Cooking oil

Dried fruits

Appetisers and snacks

Restaurant food and beverages

Other price hikes

Bread 5%

Electricity 4%

Telecommunications 3.1%

Tolls 4.3%

Alcoholic beverages 2.3%

Tobacco 4.6%