Government unveils draft budget 2013


Portugal’s Finance Minister Victor Gaspar announced the details of the budget for 2013 yesterday. The government has also announced that it wishes to remove itself from the requirements of the IMF/EU imposed austerity measures as soon as possible, but in the meantime they imposed a tough budget for the forthcoming year.

Some of the key points of the budget we have been able to identify and translate are as follows:

• Personal Income Tax (IRS) rate at the lower end will rise to 14.5% for income up to €7,000, the higher rate will be 48% for incomes above €80,000

• The supplement of 4% on IRS will remain in place and be deducted on monthly income

• IRS will account for 65% of total revenue of the government’s deficit reduction

• Unemployment Benefits and Sickness Benefit will be reduced by 6% and 5% respectively

• Christmas allowance will be paid in 12 monthly payments to civil servants and pensioners with the holiday allowance suspended

• Diesel and gasoline prices will rise with a tax increase on oil

• Public organisations in the State Business Sector (ESS) must save “at least 50%” in spending on travel, subsistence and accommodation, as well as non-operational communications

• Government will cut 3% in the number of workers in the State Business Sector, excluding EPE hospitals, and 20% of companies in the transport sector

• General Property Tax (IMI) will remain in force, limiting increases in taxation of buildings

• Transportes Aéreos Portugueses (TAP) and Aeroportos de Portugal (ANA) will be privatized in 2013

• Pensioners will suffer a cut in pensions of 3.5% from the 1,350 euros, in addition to a cut of 16% above 1,800 euros

• Strengthen control of the use of medicines and medical tests in hospitals and increase the bargaining power through centralised purchasing

• The autonomous regions of the Azores and Madeira will receive about €560 million, nearly six million Euros less than they received this year

• Municipalities will receive about €2.3 billion

• Government will proceed with the privatization process of Correios de Portugal (CTT) postal services next year

• Government has proposed reducing the Single Social Tax (TSU) to employers who hire unemployed people aged over 45 years; around 32% of those unemployed

• Statutory retirement age of civil servants to rise to 65 starting in January

• Government will launch next year a Small and Medium Enterprises package entitled ‘SME 2013’ to encourage competitiveness.

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