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Portuguese Government Announces Tax Cuts, Moves To Curb Evasion

Jason Gorringe, Tax-news.com, London

06 October 2000

This week Portugal's Socialist government took a leaf out of the books of a number of European countries and unveiled a package of tax cuts, promising to ease the burden of taxes and take tougher action on tax dodgers. The move will deprive the state coffers of revenues of some 20-25 billion escudos in 2001.

In terms of reducing the tax burden for ordinary citizens, tax rates would be cut for all but the highest paid, while company profits would benefit from lower rates from 2002. The minimum tax rate would be cut by two per cent to 12 per cent for those earning under 800,000 escudos a year and by one percent for those earning less than 10 million escudos. Finance Minister Joaquim Pina Moura said that corporation tax would be slashed by two per cent to 30 per cent in 2002 with further cuts to follow in subsequent years. The plan is due to be put before parliament on October 11, five days before the 2001 budget is due to be presented.

The Portuguese government also plans to introduce strong measures to make life harder for tax evaders and hopes to persuade parliament to relax Portugal's tough banking secrecy laws to allow access to accounts when the authorities have strong reason to suspect tax fraud or evasion. However, any suspect would would have the right to appeal to the courts against such a move. Moreover, people whose living standards were clearly well in excess of their declared earnings would, from 2002, be forced to prove their tax declarations were correct. If they failed, the Finance Minister said, they could be forced to pay taxes based on what the authorities "presumed" to be their real income.

The government's "Robin Hood" tax reforms do not stop there. It has also pledged to exercise stricter control over the use of Madeira and the Azores islands as offshore tax havens, and other measures promised for 2001 - 2002 include a plan for a new tax on wealth and property.

The tax cuts have been critcised as half-hearted by the conservative Social Democrats, the main opposition party in parliament where the government does not have an outright majority of seats. The Social Democrats said tax on companies should be cut immediately to 31 per cent, while income tax should be reduced by an average 10 per cent.

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