Portugal to unveil ‘crisis tax’ to cut deficit

Discussion in 'Economics' started by ASusilovic, May 13, 2010.

  1. José Sócrates, Portugal’s prime minister, will announce tough new austerity measures on Thursday, including a “crisis tax” on companies and wages, to accelerate cuts in the country’s gaping budget deficit.

    The new austerity package, which follows similar moves by Spain, Greece and Ireland, is being introduced under pressure from Portugal’s European Union partners for sharp budget cuts in support of a €750bn emergency plan to defend the euro.

    Angry trade union leaders called on Thursday for a “mobilisation” against what they called “harsh and unjust” measures, expected to include a 1 percentage point increase in value added tax to 21 per cent and increases of up to 1.5 percentage points in income tax.

    The increases, which are being called a “crisis tax”, are expected to include a 2.5 percentage point increase in corporate tax to 27.5 per cent. Politicians and public sector managers will also see their salaries cut by 5 per cent.

    Transfers to local authorities are expected to be reduced by £100m this year.

    The new measures are designed to reduce the budget deficit by an additional €2.1bn, from 9.4 per cent of gross domestic product in 2009 to 7 per cent this year and 2.8 per cent in 2013. Portugal’s original deficit target for this year was 8.3 per cent of GDP.

    Half of the additional reduction is due to be achieved by spending cuts and half by tax increases.


    Excellent news for European GDP growth. Can someone help out and take a look at EURO zone growth expectations in the next 5 years ?