Government to bag extra €4Bn from taxes and contributions

 In Inflation, News, Tax

Inflation is providing a positive benefit for the government in terms of taxes and extraordinary contributions for State coffers.

According to the Bank of Portugal, the Government should rake in €4Bn in taxes and contributions in 2023 on the back of higher inflation which will likely be around 5.2% this year.
It had already been expected that tax revenues and contributions would increase because the economy is performing relatively well with almost full employment, meaning more tax and social security revenues, as well as more transactions bringing in more VAT, IMI, IRS and IRC tax contributions.
However, price increases due to inflation are causing an extraordinary increase in tax burden which has been roundly criticised by the opposition in parliament saying that the Government is coining it in at the immoral expense of taxpayers.
Nevertheless, to alleviate the impact of inflation the Government has provided various measures to families and companies to offset rising prices such as zero VAT on a range of essential goods and discounts on essential food products and ISP fuel tax.
In its Economic Bulletin for June, the Bank of Portugal estimates that these tax supports will lose the treasury around €1.4Bn in tax revenues this year which, however, will be offset by an extraordinary windfall of €4.0Bn because of overall general inflation on all other items.