The government is raising VAT and social security contributions in a plan to restore the drop in wages paid to civil servants and in pensions, over the next five years.
The Government is to increase the standard VAT rate by 0.25% to 23.25% and contributions to Social Security to 11.2% and promises to restore the wage cuts by 2020.
In the document, that already has been passed by the Council of Ministers, these are but two of the measures the government intends to implement "with effect from January 1, 2015" in order to "move towards reforming the public pension system and to ensure its sustainability."
The increase in the standard VAT rate by 0.25% is to pay for the pension system, in a transparent move to please pensioners while removing a little more money from everyone. The lower VAT rates will stay the same.
These moves are part of the Fiscal Strategy Document for the next four years to 2018.
The government tried to justify the increase in VAT and Social Security rates with the need to make a "proper distribution of the burden imposed on pensioners in the name of the sustainability of the pension system."
This justification was given by the implacable Minister of State for Finance, Maria Luís Albuquerque, alongside the Minister of Labour, Social Solidarity and Security at a presentation of the 2014-2018 Budget Document Strategy. Both claimed that the Government is meeting the guidelines set out by the Constitutional Court.
Referring to the rise in VAT from 23% to 23.25%, Albuquerque said, "this is the smallest possible adjustment to meet the guidance of the Constitutional Court on the appropriate distribution of effort required for the sustainability of the pension system and is a very small adjustment."
According to the riveting Fiscal Strategy Document, for the next four years the government "intends to discuss with the representatives of the workers the gradual reversal of remuneration reductions over a five-year horizon.”
The taxpayer will still be carrying the government financially as the current eye-watering tax rates are to remain in place which last year saw €41 billion in tax removed from the pockets of the country’s citizens.
