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Portuguese Lawmakers Wave Through Retroactive Budget

by Ulrika Lomas,, Brussels

28 January 2014

The Portuguese Parliament has adopted the Retroactive Budget for 2014 (Orçamento Retificativo para 2014), providing notably for a widening of the base of the country's "Extraordinary Solidarity Contribution" (CES) imposed on pensioners. The bill was approved during a first reading.

During the course of the parliamentary debate, Portugal's Finance Minister Maria Luis Albuquerque defended plans to enlarge the scope of the CES contribution. Finance Minister Albuquerque insisted that the measure is fully "justified" to ensure the sustainability of the public finances, arguing that the alternative is to pay for the additional 0.2 percent of Government debt in the future.

Furthermore, Portugal's Solidarity, Employment and Social Security Minister Pedro Mota Soares reiterated that over 87 percent of pensioners in Portugal will remain exempt from the CES contribution, even when the base of the tax has been widened to include pension income in excess of EUR1,000 (USD1,366).

Protesting against the plans outside the Portuguese parliament, the association of pensioners in Portugal (APRe) criticized the Government for the "constant" barrage of anti-pensioner measures, provided for within the framework of the State Budgets for 2014. In particular, the group voiced its opposition to plans to increase the number of pensioners affected by the CES contribution.

Portugal's Retroactive Budget for 2014 widens the base of the CES contribution levied on pensioners. As a result, the CES will be imposed on pensions in excess of EUR1,000 a month, instead of pensions above EUR1,350 as is currently the case.

Furthermore, the bill introduces two new marginal tax rates of 15 and 40 percent, levied on pensions in excess of EUR4,611 and EUR7,126 respectively. Rates currently vary between 3.5 and 10 percent.

TAGS: Finance | Budgets | tax | pensions | Portugal | tax rates | individual income tax | Employment

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