No tax hikes for Portuguese says Leão
Portugal’s Minister of Finance João Leão has pledged that despite a review of tax brackets, no Portuguese will see a rise in taxes.
After delivering the proposed State Budget 2022 to the Portuguese Parliament on Monday, the Government explained the options taken when working out the budget which included measures such as an increase in the number of tax brackets and the official end of the special retention at source for MSMEs companies and an increase in family allowance.
As to the macroeconomic scenario, António Costa’s government foresees growth of 4.8% in 2021 and 5.5% in 2022. The deficit should continue to fall: after a 4.3% GDP deficit in 2021, João Leão is presenting a deficit of 4.3% of GDP this year while João Leão expects a deficit of 3.2% of GDP in 2022. As to debt, it is expected to reach 123% of GDP.
In terms of public investment levels, in addition to the RRP, the finance minister highlights investment made before the EU bazooka. The RRP is a mechanism that “tops up investments that had already been made” and which “provide a boost to (current) investment portfolios”.
These include, for example, important investments in the Portuguese railway network which is being modernised and the Portuguese national health service SNS.
The package of measures for IRS income tax is aimed at “the future” and foresees easing the tax burden for the middle class while tax breaks will favour families with children, and young people.
Changes to the IRS this year will “complete what was done in 2018 with over €500 million handed back to families”.
Regarding companies, tax incentives could be as much as 25% if they do not make staff redundant or distribute profits to shareholders for the next three years.
Embodied by the IFR – Tax Incentive for Recovery, this is a new instrument created for the State Budget 2022 to extend tax breaks for company investment in the first half of 2022.
Over the next five years companies will be able to deduct 10% from their usual investment expenses or 25% of the value of additional investment which means investment that exceeds the average over the past three years.