Saturday

27th Aug 2016

Portugal unveils tax hikes to meet EU bail-out demands

  • A fresh general strike has been called for mid-November after the Portuguese government imposed a further round of tax hikes. (Photo: Pedro Ribeiro Simoes)

Portugal's centre-right government unveiled across-the-board tax hikes on Wednesday (3 October) to ensure the country meets debt and deficit targets required under the terms of its bailout.

Finance minister Vitor Gaspar said that plans for an "enormous increase in taxes" in 2013 are necessary for the embattled country to meet its 2013 deficit target of 4.5 per cent.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

The Portuguese economy is expected to report a 3 percent contraction in 2012 followed by a further 1 percent dip in 2013 - a third consecutive year of recession. Unemployment is also projected to peak at 16.4 percent rather than the 15 percent figure previously projected.

Among the headline tax rises were a one-off 4 percent tax on all incomes, with earners in the top band of €153,300 expected to pay an additional 2.5 per cent solidarity levy.

Gaspar added that the government would reduce the number of income tax brackets in 2013 to five from eight, pushing millions of workers into higher tax bands.

The government also intends to raise taxes aimed at the rich by increasing taxation of capital gains, assets, financial transactions, tobacco and luxury goods. However, it backed down on plans to increase employee payroll taxes from 11 per cent to 18 per cent.

The country's largest trade union, the the General Confederation of Portuguese Workers, announced on Tuesday (2 October) that it will call its 600,000 members out on general strike against austerity on 14 November. But the country's other, slightly smaller and more moderate confederation, the General Workers' Union, said it would not join the walkout.

The country is still expected to receive the remainder of its €78 billion bailout package agreed with the troika of the European Commission, IMF and European Central Bank which runs until mid-2014.

Meanwhile, the country is also laying the ground for an expected return to the bond market in September 2013 by selling €10 billion of 18 month and 3 year bills at rates between 3.5 and 5.5 percent.

Yields on 10 year government bonds have also fallen sharply in 2012 from 16 percent to 7.5 percent, although this figure remains higher than the 7 per cent figure regarded as the tipping point beyond which debt servicing cannot be maintained.

Portugal has been shut out of the bond market since requesting emergency funding in April 2011 and had its credit rating downgraded to junk status in January.

Despite the country's economic woes, the troika expects Portugal's debt mountain to peak at just over 120 percent in 2013 before falling.

A troika statement released in September insisted that the Portuguese debt burden "remains sustainable and will be on a firm downward trajectory after 2014."

Gulen faithful at work in EU capital

Persecuted in Turkey as the alleged authors of the July putsch, the followers of Islamic teacher Fethullah Gulen stay active as ever in the EU capital.

Italy earthquake is test for Renzi

Italian prime minister is expected to present a quick reconstruction plan and request more budget flexibility from the EU after this week's tragic earthquake.

News in Brief

  1. Hungary plans to reinforce border fence against migrants
  2. France's highest court suspends burkini ban
  3. Greeks paid €1bn more in taxes in June
  4. Greek minister denounces EU letter on former statistics chief
  5. Turks seeking asylum in Greece may cause diplomatic row
  6. Merkel becomes digital resident of Estonia
  7. Report: VW will compensate US dealers with €1bln
  8. EU mulls making Google pay news media for content

Stakeholders' Highlights

  1. GoogleBrussels - home of beer, fries, chocolate and Google’s Public Policy Team - follow @GoogleBrussels
  2. HuaweiSeeds for the Future Programme to Bring Students from 50 countries to China for Much-Needed ICT Training
  3. EFASpain is not a democratic state. EFA expresses its solidarity to Arnaldo Otegi and EH Bildu
  4. UNICEFBoko Haram Violence in Lake Chad Region Leaves Children Displaced and Trapped
  5. HuaweiMaking Cities Smarter and Safer
  6. GoogleHow Google Makes Connections More Secure For Users
  7. EGBAThe EU Court of Justice Confirms the Application of Proportionality in Assessing Gambling Laws
  8. World VisionThe EU and Member States Must Not Use Overseas Aid for Promoting EU Interests
  9. Dialogue PlatformInterview: "There is a witch hunt against the Gulen Movement in Turkey"
  10. ACCAACCA Calls for ‘Future Looking’ Integrated Reporting Culture With IIRC and IAAER
  11. EURidNominate Your Favourite .eu or .ею Website for the .EU Web Awards 2016 Today!
  12. Dialogue PlatformAn Interview on Gulen Movement & Recent Coup Attempt in Turkey