Portugal Approves New Austerity Hikes
November 28, 2012 Taxation in Portugal
LISBON – Portugal hopes to see its revenues rise by 30 percent next year, which could enough to secure further bailout payments and to allow the country to participate on international credit markets.
On November 27th the parliament of Portugal voted on the national budget plan for 2013, approving an array of new taxes, tax increases, and spending cuts aimed at increasing the government’s revenues by EUR 5.3 billion.
As part of the new tax package, from 2013 all individual taxpayers will be required to pay a new social solidarity tax of 2.5 percent on their incomes.
At the same time, the threshold for the top marginal tax rate will be reduced from EUR 153 000 per year to EUR 80 000 per year, and the top tax rate will be increased from 46.5 percent to 48 percent.
Middle income earners will be most affected by the planned tax increases, with the tax on earnings between EUR 7 000 and EUR 20 000 per year rising from 24.5 percent to 28.5 percent.
It is expected that the tax hikes will cumulatively raise the government’s tax revenues by nearly 30 percent, and will help the country reach its deficit reduction goal of 4.5 percent.
The tax hikes are intended to help Portugal reach the financial targets set out by the European Central Bank and International Monetary Fund, as part of the country’s EUR 78 billion bailout package.
Commenting on the tax changes outlined in the new budget, the Finance Minister of Portugal Vitor Gaspar acknowledged that the tax hikes imposed on the country’s taxpayers are “enormous” but stressed that the budgetary plan as a whole is “another determined step towards recovery”.
According to the Finance Minister the newly approved tax hikes will allow Portugal to shore up its financial standing and restore investor confidence in the country, allowing the government to participate on the international credit markets by September 2013.
Photo by PSD – Partido Social Democrata