Portugal Unveils Tax-Lite 2014 BudgetPortugal's Finance Minister Maria Luis Albuquerque has unveiled details of the country's 2014 State Budget (OE 2014) providing to redress the public finances to the tune of around EUR3.9bn (USD5.3bn), to be achieved via a dramatic cut in expenditure rather than via massive tax increases, in contrast to the previous budget.
Within the framework of the OE 2014, the Government intends to maintain the extraordinary solidarity contribution, to increase car and diesel tax, as well as to raise taxes on alcohol and tobacco. Furthermore, the energy and banking sector will see their contributions increase, and real estate funds will be taxed.
The Government also plans to reduce corporate income tax from 25 percent to 23 percent in 2014.
Given that 70 percent of all state spending covers personnel costs, the Government aims to progressively reduce public sector pay by between 2.5 percent and 12 percent, as a temporary measure, for monthly remuneration in excess of EUR600. Pensions will also be cut under the plans.
Defending the draft legislation, Finance Minister Albuquerque emphasized that the measures are designed to enable Portugal to exit its international economic and financial assistance programme in June 2014. The Minister nevertheless warned that this will not be the last process of adjustment for Portugal.
Concluding, Finance Minister Albuquerque stressed that it is the duty of the Government to ensure that future generations are not disadvantaged by past mistakes. Portugal is on the right track, she insisted, making clear that efforts to improve market conditions for banks and businesses, as well as to revive productive investment, and economic growth and employment will create scope for other growth-enhancing measures, most notably for the Government's plans to reform corporation tax.
Portugal's budget is based on gross domestic product growth (GDP) of 0.8 percent and aims to reduce the deficit to 4 percent of GDP in 2014, from 5.9 percent this year.
For further information please contact Alberto Soares, international contact partner for our firm in Portugal on
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