Portugal Increases Sales Tax As Part Of Austerity Package

by Robert Lee, Tax-News.com, London

08 May 2002

The new Social Democrat government in Portugal at the weekend announced the launch of an emergency austerity package in order to keep the country's budget deficit under the 3% ceiling set for members of the euro zone.

Although prior to its election the government pledged to cut taxes, reports in the country's media following the Sunday announcement have been mostly favourable, praising the coalition's Finance Minister, Manuela Ferreira Leite for her 'courage' in introducing 'serious, competent, and necessary' measures.

In addition to a sales tax increase of 2% (from 17% to 19%), the Portuguese Finance Minister also announced a freeze in civil service recruitment, the closure of 30 publicly funded institutions, the merger of 40 others, and the suspension of a credit subsidy designed to help young taxpayers purchase houses.

According to reports, the government has warned that further belt-tightening will almost certainly be necessary later in the year, in order to further reduce the budget shortfall.

Recommended