As new taxes to curb property speculation come under discussion in Parliament this week, there are ping-pong reactions in the Algarve.
Some think the 40% tax on windfall gains “doesn’t go far enough” while others say more taxes of any kind are exactly what the country doesn’t need.
“Portugal needs growth and less tax,” property investment broker Constantino Jordan told the Algarve Resident. “So anything along these lines might just not be the best move at this moment.”
Environmental NGO LPN however disagrees. A leading member of the board and respected academic Pedro Bingre considers the government should go a lot further.
“We think the tax on windfall gains should be 100%,” he explained. “It would do away with the corruption that has dogged development since the revolution and has really seen chaos in terms of urban planning.”
Bingre explained that the system LPN advocates is very much like that which operates in Northern and Central Europe.
“The idea is nothing ‘new’ as such. We would simply say that the Government isn’t proposing to go far enough.”
The new law – up for discussion in Lisbon this week – is designed to encourage urban renewal, writes Público newspaper.
It proposes a tax of between 20-40% on profits made from converting rustic land to urban land, but at the same time sets out to give councils “more flexibility” in granting change of land use.
“It’s possible to reclassify land, transforming rustic to urban. If there are detailed plans, there won’t be the need to revise the PDM (Municipal Master Plan),” Secretary of State for Planning and Nature Conservation Miguel de Castro Neto told Público.
It’s not however a “total liberalisation of the reclassification process”, he assured. “On the contrary, it will be more demanding. We believe we are creating the conditions necessary for a clear reorientation of investments towards urban rehabilitation.”
Urban rehabilitation right now lags way behind the European average (6% as opposed to Europe’s 37%) – and thus the new law will also tie developers down to proving the economic and financial viability of their projects and even taking a share in maintaining them in the future.
The whole idea to tax what are known in the property sector as “windfall gains” has long been advocated by specialists, certain political parties and NGOs, explains Público.
The government is simply acknowledging the pressure at last, and discussing a tax model. “If I am going to allow a rustic plot to become urban, there will be a gain,” confirmed Castro de Neto. “And that gain will be taxed.”
On the table is the 20-40% tax, explains Público, but “the numbers are preliminary, and the final solution could be different.”
What the changes will really mean for future development remain to be seen, but as one long-standing member of LPN said on Monday: “On first reading, this looks useful and could have beneficial effects on territorial planning. But in Portugal there are measures that at first glance look good, but which later, in their practical application, end up being bad…”
By NATASHA DONN news@algarveresident.com
