Brusssels, 04/10/2012 (Agence Europe) - On Wednesday 3 October, the Portuguese government announced income tax rises across the board as one of the austerity measures to replace the government's initial plans that it has to drop amidst widescale social unrest (see EUROPE 10701). The centre-right government of Pedro Passos Coelho is now planning a one-off 4% income tax for everyone and a reduction of the eight tax bands to five, explains finance minister Vitor Gaspar. This means the average rate of tax will rise from 9.8% in 2012 to 13.2% in 2013, according to the minister. Individuals will have to pay a special one-off 4% income tax levy.
The new measures, about which the European Commission has made noises of approval, will be included in the 2013 budget to be presented to the Portuguese parliament on 15 October. They replace a previous batch of measures that gave rise to a wave of protest, measures that included an increase in social security contributions by workers and a reduction in social security contributions by employers. The across-the-board tax rise aims to provide the cash that would have been saved by scrapping the thirteenth and fourteenth month bonuses of civil servants and pensioners to even out pay. Gaspar said that the economic adjustment programme implemented as part of the bailout programme is tougher than expected. Unemployment forecasts have been increased to 16.4% of the working population in 2013 (previous estimates suggested 16%). (SP/transl.fl)