Portugal Announces New Austerity Measures

by Ulrika Lomas, Tax-News.com, Brussels

05 September 2011

Finance Minister Vitor Gaspar has announced further tax measures to assauge concerns that Portugal will be unable to achieve the ambitious fiscal consolidation plans previously laid out by the government.

Gaspar said that the government plans a second raft of measures for 2012 to ensure that Portugal meets its consolidation targets, which entail reducing the budget deficit to 0.5% of GDP by 2015. The government is attempting to slash the deficit to 5.9% this year, from 9.1% of GDP in 2010. Further ambitious structural reforms have been deemed necessary by the government to deliver on the country's commitment under the European Union's Excessive Deficit Procedure to reduce the deficit below 3%.

In his latest announcement, Gaspar said the government proposes to increase the personal income tax rate applicable to income above EUR150,000 by 2.5% in 2012 and for the next three years; to introduce a 3% levy on corporate profits above EUR1.5m in 2012, also for the next three years; and to revoke a number of tax breaks.

Further savings will be achieved from the public sector by reducing generous pension payments and implementing a public sector hiring freeze.

Previously, the government announced an unpopular 50% extroardinary tax on employees' christmas bonuses.

Recommended