The Portuguese government’s income from property tax (IMI) grew 8.6% in 2013 due to the nationwide and somewhat overdue revaluation of the country's buildings to apportion sensible rateable values.
The overall taxation of Portugal’s residents increased 8.1% between 2012 and 2013 reaching an unprecedented €57,800 million making former Finance Minister Vitor Gaspar’s prediction of ‘massive tax increases’ spot on.
This increased income for the treasury was mainly due to a 25.7% rise in money from direct taxes, especially the remarkable increase of 34.3% in personal income tax (IRS) revenue, while company taxes (IRC) grew 21.6% despite a hard-hitting recession. More honesty brought about by the fear of getting caught has started a wave of more accurate tax declarations from citizens and companies alike.
Indirect taxes such as VAT and other taxes on goods remained unchanged in 2013, but VAT which represents about 60% of this tax, actually fell by 2.0% showing a swifter decline than in that of private consumption, down 1.4%, and will disappoint treasury planners who said the 23% rate would yield more cash year on year.
Revenue from the tax on fuel decreased for the sixth consecutive year, this time by 1.6% as drivers give up their cars, travel less or drive in a more fuel efficient manner, and the country’s smokers either gave up, cut down or bought dodgy imports as tax revenue on cigarettes and tobacco declined by 2.9%.
The reasons offered by the treasury for the increases in tax revenue from a clearly cash-strapped country were "extraordinary revenues earned under the Scheme for Settlement of Outstanding Tax Debt and Social Security in the amount of €1,280 million last December, but above all the increase in income tax was the key."
Overall Social Security contributions increased by 2.3% as a result of the rate going up by 3.3% and despite employment dropping 2%.
The government is receiving more tax than it had planned for and hence has been able to shed fewer civil service jobs than it said it would, hoping that those reaching retirement age will reduce the figures sufficiently to make it look like the executive is being tough on its own headcount.
There is an election coming up when re-election strategies will supercede the most carefully crafted financial plans.
