Portugal to tax big business and rich in bid to fix deficit
Portugal’s big business and the rich will bear the brunt of the country’s new austerity programme, as Socialist Prime Minster Jose’ Socrates announced immediate measures to curb a growing deficit.
Portugal’s new economic package, which also includes a delay in investment and the sale of state assets to fix its finances, came just a week after fellow eurozone member Greece introduced similar unpopular measures.
But those who could best afford it would bear the added tax burden, Prime Minister Socrates, insisted.
“This programme has been established along the principles of justice and equity in the redistribution of wealth,” Socrates told reporters.
“There will be no increase in tax, with the single exception of income higher than 150,000, which will be imposed at the level of 45 percent,” he added.
The aim is to get the public deficit back to 2.8 per cent of Gross Domestic Product by 2013, under the European Union’s 3 per cent limit.
Last year’s deficit soared to 9.3 percent of GDP from 2.8 per cent in 2008 as Portugal, like Greece and several other eurozone members, tried to pump-prime its economy in the face of the worst global slump since the 1930s.
Socrates added that other measures would also target individuals and businesses in the higher income brackets.
“The tax system that we had profited people with high incomes,” he said. “We want to put an end to this injustice.”
Finance Minister Fernando Teixeira dos Santos told reporters that the new stability and growth programme for 2010-2013 would, after local consultations, shortly be submitted to the European Commission.
“Through to 2013, increases in civil servant salaries, which were frozen in 2009, will be less than inflation,” he said.
Only one official would be recruited for every two that left their posts, he added.
And since salaries and social services accounted for 75 percent of total public spending, he said, welfare payments would have to be limited.
Exceptional measures taken last year to offset the impact of the economic slowdown, most notably on unemployment and jobs for the young, would also be scrapped, Teixeira dos Santos added.
Greece has faced similar financial problems to Portugal, but to a far more serious degree.
The 4.8-billion-euros (6.5-billion-dollar) austerity package the Greek government announced last week sparked widespread protests and strikes.
In Portugal too last week, tens of thousands of public sector workers went on strike, closing schools and hospitals in protest against the government’s wage freeze and other austerity measures.
But the economic crisis in Greece has raised doubts about the credibility of the eurozone, with Athens demanding a concrete EU commitment to help it through the crisis.
With this extra income, the total accumulated national debt should be trimmed back from 91 percent of GDP in 2012 to 89.3 percent in 2013, the minister said. The EU limit for total debt is 60 percent.
“The plan has to be credible to restore confidence,” Teixeira dos Santos said, stressing that the government was being cautious in forecasting growth of 1.7 percent in 2013, compared with 0.7 percent this year.
The minister, who serves in a minority Socialist government, called on the opposition to play a full part in a “national effort.” Their support was fundamental to success, he said.
The main opposition Social Democratic Party declined to comment on the plan in detail but said it welcomed “adjustments made in line with proposals from other parties.”
