Portugal’s government expects to collect an additional €79 million from tobacco and alcohol taxes in 2026, driven by higher consumption, according to the proposed State Budget. Revenue from the Tobacco Tax (IT) is projected to rise 4.4%, or €71 million, to €1.7 billion, while the Tax on Alcohol, Alcoholic Beverages, and Drinks with Added Sugar (IABA) is expected to increase by €8 million, or 2.5%, reaching €328 million.
Combined, the two levies are estimated to generate €2 billion, accounting for 5.3% of indirect tax revenue and just under 3% of total tax revenue. The budget notes that IABA-related state fiscal expenditure will rise 2.2% to €72.2 million, largely due to exemptions for “alcohol for therapeutic and sanitary purposes” and, to a lesser extent, non-alcoholic beverages. These exemptions are projected to represent 86.7% of IABA tax expenditures in 2026.
By contrast, the tobacco tax is expected to generate revenue without incurring any tax expenditure, reflecting its role as a net contributor to the state budget. The government cites continued private consumption as the key driver behind the anticipated growth in tobacco and alcohol tax receipts.