Portuguese Government Approves Tax Hikes

The Portuguese government recently approved substantial tax hikes in order to keep to its austerity program, but it faced opposition from all parties who voted against the deficit reduction measures. These measures mean most workers will lose the equivalent of around one month income in 2013.

The opposition feels current austerity measures won’t do enough to revive the economy and the concern is that Portugal could end up going the same way as Greece. However the European Central Bank and the International Monetary Fund have praised the government’s strategy and feel it will do much to help Portugal return to financial health.

For its part, the government feels it’s hands are tied and there is simply no choice but to implement these tax increases. The bailout deal which is worth a total of €78 billion requires Portugal to cut its deficit, and the country has currently received €61 billion in bailout funds.

Although the finance minister of Portugal has been quoted as saying the tax hikes are “enormous” he is hopeful they will help restore investor confidence in the country, and that Portugal will still be able to obtain international credit from September next year as planned.

The current spending cuts are worth €2.7 billion, and the aim is to reduce the budget deficit to 4.5% in 2013 compared to 5% in 2012. The government hopes the new taxes will increase revenue by 30% in 2013. However the Organization for Economic Corporation and Development is predicting the economy will contract by 1.8% next year, and the government forecasts showed the unemployment rate will increase from 15.7% to reach a record 16.4% in 2013.

 

Portugal Makes it Easier for Expats to Take Tax Breaks

I can just imagine one of those signs that points at you no matter where you are in the room, although they would have to use today’s technology as this sign would need to point right at your wallet. Portugal wants your money, or rather it wants the money of wealthy expats. In a bid to entice more of them to put their money into Portugal, it has relaxed its expat tax rules.

Three years ago, a special tax rate for non-residents of 20 per cent on income generated in the country was introduced by the government. Foreigners’ income was also exempt from Portuguese taxation, though expats could still be liable for tax in their home country.

Making no bones of its intentions even then, Portugal limited the new “perks” to high net worth individuals (HNWIs) or “high value-added” and to have been Portuguese residents for less than 5 years.

They also had to prove that they had lived and paid tax in their home country before moving to Portugal and during their time living in Portugal, with documents from their own tax authority. But now, this hoop-jumpery is no longer neccesary in order to qualify for the tax breaks, expats simply need to sign a declaration saying that they were previously resident in another country. This now opens the possibility of moving to Portugal for those who may have moved around the world, or who may not be on the best of terms with their own tax authority.