Portugal To Cut Tax, But Arms Taxman With New Weapons

by Ulrika Lomas, Tax-News.com, Brussels

19 October 2004

In addition to cuts in income tax, the Portuguese government has proposed draconian new laws aimed at clamping down on tax evasion by wealthy individuals and companies.

The measures, presented in the 2005 budget, form part of a plan to increase tax revenues by over 4%, despite the announcement of cuts in both personal and company income tax.

In essence, the tough new regime will see the creation of an elite fiscal fraud squad, the watering down of banking secrecy laws and more frequent investigations into the tax affairs of the wealthy, whilst the burden of proof in tax disputes will shift from the taxman to the taxpayer.

On a more positive note, companies will benefit from a 5% reduction in corporate tax to 25%. However, firms will not be able to use deductions to reduce tax bills by more than 40%, a measure thought likely to hit profits in the banking sector.

According to finance minister Antonio Bagao Felix, celebrities would also be wise not to flaunt their wealth in the media.

"People who exhibit a level of wealth in popular magazines that has no correlation with their tax declarations will have to explain why," he warned.

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