Reductions promise savings “that could exceed €400”
Yesterday’s Council of Ministers approved a €500 million cut to personal income tax (IRS) that will most significantly impact on the ‘second to sixth’ income brackets (those earning below €41,000 per year).
The measure is to be applied retroactively to January 1 of this year – and promises annual savings to millions compared to what was planned in the State Budget for 2025, stress reports, which suggest some people/ families could see themselves saving €400 per year.
The savings will be most felt by earners in the 2nd to 6th IRS categories (that is, people earning more than €8,0859 to those earning up to €41,629). The cuts will be structured per category.
Official simulations have highlighted several examples: a single person without children, with a gross monthly income of €1,000, will save €34 compared to the amount initially forecast for 2024.
A taxpayer with the same profile, but with an income of €3,000, will save €207 compared to what was anticipated.
In the case of couples without children and with a joint income of €2000 per month, the saving will be €248 compared to what was budgeted.
If the income is €3000, the relief rises to €414. These figures also apply to couples with two children and the same income.
Pensioners will also feel the effects of the new measure, say reports. A pensioner with a pension of €1000 will save €34 compared to the planned amount (€352 if one considers IRS tables of last year). For pensions of €2,500, the relief will be €166.
The simulations take into account the maximum deduction of €250 in general expenses per person and other deductions of €700.
The IRS reduction covers the first eight tax brackets.
The government also promises to adjust withholding tax tables, reflecting the reduction in rates with retroactive effect to January, “to ensure greater proximity between the tax withheld and that actually due”.
These changes were in large part reforms that the government wanted to enact last year, but was ‘scuppered’ by other parties. Now that the parliamentary configuration has changed, there is much more likelihood that the changes will be approved: CHEGA, for example, now the second strongest political force, has intimated that it is ready for further reductions in IRS and IRC (company tax).
In interview with RTP yesterday, prime minister Luís Montenegro said that, despite warnings from institutions like the Bank of Portugal, he is confident his government “will reach the end of the year with balanced public accounts and a new budget surplus”, irrespective of these new measures and the commitment to increase military investment with NATO allies. “We haven’t discovered any gold mines to pay for these expenses, but we are exercising a policy that I, as leader of the opposition, defended,” that of “repaying the fiscal effort of the Portuguese” when “budget execution allows it”, he said.
Just like last year, “we are managing this year’s budget execution with balance and a sense of timing”, Mr Montenegro added, stressing that recent figures from National Statistics Institute INE on the general government balance for the first three months of the year in national accounts – the accounting perspective that matters to Brussels – are a trump card, as they show “a better performance than we had last year”. ND
Source material: Expresso/ Correio da Manhã/ Zap
