Portugal Adopts Austerity Measures

by Ulrika Lomas, Tax-News.com, Brussels

11 May 2010

The Portuguese parliament has approved two tax measures contained in the government’s budgetary consolidation plan, including a proposal to levy a 20% tax on stock market capital gains as well as plans to introduce a new tax bracket for the country’s highest income earners.

The government estimates that the 20% tax imposed on stock market capital gains could serve to generate an additional EUR200m a year for the state, while acknowledging that this figure may have to be revised downwards given the current slump in the stock market. Both non-residents and small investors (up to EUR500) would remain exempt from the tax.

Plans to establish a new 45% tax rate levied on income in excess of EUR150,000 a year could serve to generate a further EUR30m for the government in 2011, according to the Secretary of State for Tax Affairs, Sergio Vasques.

Portugal’s government has recently pledged to reduce its record deficit of 9.4% of GDP in 2009 to 7.3% in 2010, to then further reduce the deficit to below the 3% European Union threshold by the end of 2013. Determined to achieve its ambitious targets, the government has announced plans to postpone certain public investments, including the construction of a new Lisbon airport.

Portugal’s Finance Minister Fernando Teixeira dos Santos has also emphasized the government’s commitment to realizing its targets, stating that if tax rises prove necessary, then the government will have to resort to solutions of this nature, thereby confirming that the government is prepared to adopt new measures in addition to those already agreed by parliament.

The latest tax bills are due to be examined shortly in a second reading in Parliament before being definitively adopted.

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