Portugal experienced a large increase in its VAT rate from 15% to 23% between 2008 and 2011 due to intervention from the Troika in response to Portugal's economic difficulties. This led to higher taxes being applied to many goods and services, including food and beverages. While the VAT increase generated more tax revenue for the government in the short term, it contributed to declining economic growth, rising unemployment, emigration, and a drop in general income and private consumption in Portugal. The fitness industry in Portugal, represented by AGAP, opposed further VAT increases but recognized the challenging economic situation made reductions unlikely. Therefore, AGAP's strategy was to advocate for disconnecting public awareness messaging from the VAT issue and encourage operators to manage their businesses

1. PORTUGAL
VAT (BAD?) HISTORY
IHRSA EUROPEAN CONGRESS – MADRID 2013
The Perils of Political Inactivity in your Country and the Opportunities

2. VAT abnormal path
25%
23%
20%
21%
In 3 Years!!!
15%
10%
5%
5%
6%
0%
2006
2008
2010
2011

3. Troika has landed in Lisbon in 2011… not for
holidays!
VAT effects
• Reduction of VAT
exemptions, including food &
beverage;
• VAT increase in electricity and gas;
• Subjection to the higher rate of VAT
of goods and services previously
subject to reduced or intermediate
rates.
And a lot more
• Special Taxes on Consumption
• Heritage
• Fight tax evasion
• Wage cuts in the public sector
• Increase in Vehicle taxes and tobacco
• Increase user fees in hospitals
• Strong increases in Public transports

4. Overall performance final 2012
• The revenue for 2012 decreased by 3.2% over the previous year
• The net tax revenue accumulated showed a variation of 6.8%, which has an underlying trend of -9.5% in direct taxes and 4.7% in indirect taxes.
• With regard to indirect taxes is to refer to the contraction of economic
activity and the reduction in disposable income, with an impact on
consumption, most noticeable in the ISV and VAT

5. Budgetary Implementation of state tax revenue (January-December)
Direct Taxes
Indirect Taxes
VAT
TAX REVENUE

6. In other words, what headaches do we face?
• GDP (2011: -1% | 2012: -3,3% | 2013E: -1,6%) = -6%
• Unemployment (10,8 in 2010 to 16,5%; 24,6% [15-34] years; 60% of long-term
unemployment)
• Emigration (more than 200k left PT)
• Drop in general Income (-25%), due to taxes increase and wage cut
• Private consumption decrease (2011: -4% | 2012: -5,6% | 2013E -3,4%
• VAT: 17 points increase
• Discrediting politicians and politics
• Middle class exhausted
• Lack of confidence & self-esteem, …, ‘What else?’

7. But, concerning fitness:
GOVERNMENT
INFORMED US THAT
HAS COLLECTED
122% MORE IN VAT
THAN IN 2011
Example:
Food & beverage sector:
2011 VAT(13%) income: 250 M€
2013 VAT(23%) income: 600 M€*
+140%
* expected
2014 State budget has confirmed 23%.

8. No hopes, but we have some “allies”

9. Our strategy
• Our members would not tolerate that AGAP
´accepts´ a normal VAT rate, but we are no longer
using VAT as flag;
• Probability to lower VAT is greatly reduced in actual
economic situation. Energy & food were also
affected so before any measure taken place on
physical activity, other sectors may be
considered...
• Also we would like to disconnect public awareness
from vat message and entrepreneurs should face
business as it is, without excuses... Management is
an issue!
• That's why it must be under an international
agenda and not PT/ES issue.

10. Way out & alternatives
Nutrition service and counselling
(paramedic activity, exempt of tax)
Legal procedures
• AGAP has asked legal and fiscal
advice to experts (Deloitte and
lawyers)
• Need to update constitution registry
to include nutrition services, as
complementary (?) activity
• Change VAT framework by the Tax
Authority
• Be registered and certified by the
National Health Authority

11. Thank you all!
José Júlio Castro (President)
jjvc@agap.pt