Untitled-1.jpg

A taxing year ahead?

It’s swings and roundabouts as Portugal enters 2015 – with rates “skyrocketing” in many areas and values attributed to properties increasing by as much as 8000% – but with price shocks generally “levelling out”. In the end, it’s not so much what we know as what we don’t know that will determine whether 2015 is the year Portugal starts to recover its internal economy, and people feel ready to spend again.

As always, we’re dependent on what unfolds elsewhere in the Eurozone. Thus, the news that Greece has been once again plunged into political turmoil could spell “black clouds” on Portugal’s horizon – upsetting the homework of a coalition government pinning its hopes on re-election in October.
But first to the things we know. What exactly will be going up?

IMI (Rates)

This is a difficult one, as IMI taxes are charged at different rates by different councils – with half the country’s municipalities opting to choose the lowest rates (0.3%) but many choosing to run with re-evaluations on property values that leave householders open-mouthed with disbelief. “This year will be a tragedy for Portuguese people, who will all be taken by surprise,” the head of APEMIP, the association of estate agents, Luís Lima has predicted.

Elsewhere, Luís Menezes Leitão, the president of ALP, the Lisbon association of property owners, said: “Owners will have to pay a colossal amount, support huge increases and may even lose their homes due to non-payment of rates.”
Consumers’ association DECO has already launched a campaign to reduce IMI rates, which is rapidly gathering signatures.

In the Algarve, as elsewhere, it depends on where you live as to how much you will be paying. Silves and Alcoutim are among the most “lenient” boroughs, while Albufeira and Portimão are the municipalities charging homeowners the maximum IMI possible.

Portimão has been hugely criticised for increasing rateable values as well, and is currently in major hot water over the “civil protection tax” it raised this year, which has already relieved householders of nearly €1 million.

Fuel

Despite global prices in freefall, prices at the pumps in Portugal will be increasing by between 5-6.5% a litre, depending on what fuel you are using, due to the new “green taxes” brought in by the government. Another consequence of these green taxes is a hike in supermarkets on the price of plastic bags (up to 8-10 cents from January 1). See story on page 6.

Electricity

Bills, especially for householders who have not yet joined the free market, will be going up by the highest rate since 2012 – an average increase of 3.3%.

Telecommunications

Service providers Nos and Meo have already announced increases of 3% and 2.5% respectively. Vodafone is expected to follow suit.

Alcoholic drinks

These too have been singled out in the coalition government’s 2015 State Budget. Beer, depending on its strength, is going up by 2.9-3% while spirits will increase by 3% and Port wines and ‘aguardentes’ by 0.7%.

Electronic cigarettes

Originally designed to skip over legislation hammering traditional cigarettes, electronic models are now suffering big time. Their prices have leapt, there is a new tax on the nicotine inside them and ‘electronic smokers’ are no longer welcome anywhere, other than the street. Also likely to face price hikes this year are cigars, rolling, chewing and heatstick tobaccos.

In other words, almost nothing is going down in price, though certain prices will stay unaltered – not that this will bring smiles to many faces. Continuing with 2014 prices will be bread, motorway tolls, rents and public transports.
Gas is still an unknown quantity, as conversely is the price of milk and cheese.

Anyone unlucky enough to have to visit the hospital will find payments there five “cêntimos” less than last year – but the real good news is that prices of medication are also due to drop, bringing Portugal more in line with Spain, France and Slovenia, writes Público.

House prices too are expected to stay stable, if not increase. In Lisbon, Porto and the Algarve, the market is slowly but surely recovering – thanks hugely to the incentive of “golden visas” for non-European foreigners and retirement perks for non-habitual residents.

That leaves us simply with water bills, which, again, “may be going up or may be going down”. It all depends on where people live.

But as newspapers analyse the picture taking shape for 2015, there are no certainties. Público’s Luís Villalobos explains that consumer habits are very much “at the mercy of events”.

“All we need is a bit of bad news for the Portuguese to throttle back on their spending – a phenomenon already witnessed in the second half of this year,” he wrote this week.

Thus 2015 could become “a veritable rollercoaster”. If there are changes to the dynamics of private consumption, new austerity measures may be needed for the government to reach its deficit targets.

The PSD-CDS-PP coalition is already under pressure as troika lenders doubt Portugal will be able to meet its 2.7% target – and that is without looking at the consequences of failures further afield.

Greece, for instance, may well end up renegotiating its debt. “Any deal or restructuring offered to Greece may have to be offered to other countries – particularly those that took bailouts and have very high debt levels (both Ireland and Portugal qualify),” economic research chief Raoul Ruparel explains on the Open Europe website.

Meantime, the European Central Bank will be meeting before the Greek elections in January “to discuss monetary policy and debate the prospect of embarking on injecting billions into the eurozone’s economies through quantitative easing (QE) – or electronic money-printing”, reveals the Guardian. And as economists are forever warning, a QE scenario for Europe is fraught with uncertainty as the eurozone is a fragmented economy – whether or not it was designed to be – and Germany is dead against QE anyway.

In other words, it’s a case of hunkering down and waiting to see what happens.

Happy New Year!

By NATASHA DONN [email protected]