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Portugal backs down on social security tax rise

A Council of State meeting held last Friday at the President of Portugal’s official residence in Belém was expected to be a ‘make or break’ moment, with speculation abounding on many issues, including the dissolution of government. However, the meeting convened by President Cavaco Silva failed to produce any concrete answers over recently announced austerity measures that led to massive street protests across the country during two consecutive weekends.

Following an eight-hour long meeting, during which Minister of Finance Vitor Gaspar made a presentation, the government announced last week that it would seek alternative solutions to a planned increase in social security contributions (Taxa Social Única) for workers next year from 11% to 18%.

Austerity measures announced by the Prime Minister, Pedro Passos Coelho, on September 14 had triggered a wave of protests across the country as well as internal political tension, which eventually led to the President of Portugal calling a Council of State meeting.

As had been expected, the government backed down on its decision to increase the TSU, but is now studying new measures that could involve further cuts to private and public sector workers’ subsidies.

At the time the Algarve Resident went to press on Wednesday, a Council of Ministers meeting was taking place to discuss the 2013 State Budget.

The Prime Minister announced that a proposal to increase a set of taxes, including IRS and taxation on property, was being prepared for next year’s State Budget.