Finance Minister Maria Luis Albuquerque, Minister of Solidarity, Employment and Social Security Pedro Mota Soares and Minister of the Presidency and Parliamentary Affairs Luis Marques Guedes arrive at the press conference to announce the Strategic Budgetary Document (DEO) in Lisbon on April 30. The document defines the guidelines for the policies with budgetary implications until 2018. EPA/MANUEL DE ALMEIDA
A whole new batch of budgetary measures – including tax hikes to the VAT rate and social security contribution TSU – were announced by the Portuguese government on Wednesday (April 30), during the presentation of the Strategic Budgetary Document (Documento de Estratégia Orçamental, or DEO) for 2015-2018.
The measures are aimed mostly at reducing Portugal’s deficit to 2.5% of GDP (gross domestic product) by 2015, but also reducing cuts to pensions and public sector salaries.
Starting in 2015, the VAT rate in Portugal will increase from 23% to 23.25%, generating €150 million per year according to the government’s predictions which will be used to “guarantee the sustainability of the national pension system”.
“No pensioners will be left in the same or worse situation than they were before,” guaranteed the Minister of Solidarity and Social Security Pedro Mota Soares, during the presentation of the document.
He explained that pensioners receiving under €1,000 will be exempt from any extraordinary contribution.
And while pensioners receiving between €1,000 and €2,000 will be subject to a 2% levy, it is still lower than the 3.5% currently included in the CES tax (Extraordinary Solidarity Contribution).
Also to see a hike is the social security contribution (Taxa Social Única, or TSU), which will go up from 11% to 11.2% next year. It will affect both workers of the public and private sectors.
“We are trying to implement the smallest hikes we can on these taxes to diminish their impact,” said Finance Minister Maria Luís de Albuquerque following the presentation of the DEO.
On the other hand, the government announced it is planning to gradually restore the salaries of public workers over the course of a five-year period. In 2015, the first 20% of what was cut will start being restored.
However, the restoration of the remainder will be dependent on the evolution of the public sector’s finances, says the DEO.
The document was approved by the Council of Ministers early Monday morning (April 28).
It was expected to be presented later that day or on Tuesday, however, a source from the Presidency of the Council of Ministers told news agency Lusa that the tax authorities were still working on the document on Tuesday afternoon due to its “complexity”.
The presentation of the DEO finally took place the next day on Wednesday at 5.30pm – the deadline up to which the document had to be sent to Parliament and the European Union.
In simple terms, the DEO is a document that the government presents on a yearly basis to present its budget strategy for the coming years – in this case, up to 2018.
