Portugal’s Minister of Finance said today that the reduction in the income tax surcharge will go ahead for next year, whatever the year end national deficit.
Keen to assure vacillating voters that her pledge remains in place despite yesterday's shock deficit figure for 2014, Finance Minister Maria Luís Albuquerque reiterated that the reduction in the austerity surcharge on personal income tax will go ahead and that it does not depend on hitting the deficit target for this year.
"This reduction is a commitment that is in the law and does not depend on compliance with any deficit targets, it depends only on the comparison between the IRS and VAT income figures which is included in the State Budget for 2015."
Ensuring that the tax reduction will be made under "any circumstances" Albuquerque confirmed also that the Government is confident of the "positive development of revenue and expenditure" arguing that the government will not just rely on increased revenue to meet the deficit targets, but also on reduced spending.
The finance minister stated that the amount to be returned will result from calculations at the year end. In late August, Albuquerque said that she expected the 2016 reduction in the austerity tax hike could exceed 25%.
"The value can only be worked out with certainty at the end of December and will be announced in January 2016. The current expectation is for a 25% drop but it could be more.”
On Wednesday, the National Institute of Statistics announced that the budget deficit by the end of June 2015 was 4.7% of GDP, a figure worryingly higher than the ambitious deficit target of 2.7% set by the Government for the year.
Albuquerque of course is speaking with the confidence of one who expects still to be finance minister after the October 4th elections, she would be foolish to project any other image, but as the computations are set in current legislation, whichever government is returned will be able to action the scheme after the figures have been worked out.
For pensioners, the European Court of Human Rights has been no help at all by ruling today that the government had every right to raise taxes by the special income tax supplement.
An Oporto pensioner on an enviable €1,980 a month civil service pension had taken the case to Europe, claiming the tax hike has interfered with his ‘right to property’
The court rules that the government had the right to raise taxes on pensions in a ‘limited and temporary" form to help save the country from financial ruin in 2011.
The plaintiff saw his pension cut by 4.6% in 2013 and 2014 as part of the austerity measures taken in exchange for the Troika loan of €78 billion.
The European Court ruled that the Extraordinary Solidarity Contribution was found to be "legal in the Constitutional Court rulings in 2013 and 2014," adding that "the measures applied to pensions sought a fair balance between the general interest of the community and the protection of human rights of those taxed.”
Comments
I am no mathematician but with a government public debt rising by around 10 billion euros annually .... it is hard to see where exactly the Portuguese national, regional and local governments have cut their own cloth. Cut the private sectors cloth certainly but danced around any serious cloth cutting of their own.