Portugal To Hike Top Tax Rate

by Ulrika Lomas, Tax-News.com, Brussels

22 March 2010

Portuguese Prime Minister, Jose Socrates has released a crowd-pleasing package of austerity measures with assurances that the tax burden would not be increased until 2013, except for an imminent hike for the country’s highest taxpayers. In order to rein in its deficit, which is expected to increase to 8.3% of GDP by 2010, the authorities are also to remove a number of tax breaks.

Under the austerity plan, the top personal income tax rate will be increased to 45%, from 42% currently, on income above EUR150,000, and tax breaks for the country’s most affluent will be reviewed.

"The tax system that we had profited people with high incomes; we want to put an end to this injustice," Socrates told Agence France Press.

The government is also thought to be planning to cut tax breaks linked to healthcare and education and hike taxes on stock market gains in 2010.

Spending cuts will likely amount to about half of the planned deficit reduction, while it is expected that about 15% will be found through revenue measures. The remainder will come from improved economic growth; expected to recover to 1.3% in 2012, and 1.7% in 2013.

The austerity plan is expected to bring Portugal’s deficit back to within pre-crisis levels of 2.8% of GDP by 2013.

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