Poor October tax revenue figures mean that the long-awaited reduction in the austerity induced 'income tax surcharge' promised for next year, will be precisely zero.
The Secretary of State for Fiscal Affairs, Paulo Núncio, (pictured), was in Parliament today to explain how this coalition pre-election promise turned to dust.
It was all to do with VAT and income tax receipts which by October had fallen below budget. These figures are unlikely to improve before the year end, meaning the skillfully worded expectation promoted by the Ministry of Finance and the Passos Coelho executive has led to no reduction at all.
Figures from the Directorate General of the Budget show that the sum of these two taxes is €22.6 billion. This is ahead of last year’s €21.8 billion, but one that is short of the combined VAT and income tax target.
In the 2015 state budget Passos Coelho announced that he would keep the income tax surcharge in place, but added that if the personal income tax and VAT revenue exceeded the annual target, he would issue a refund. The surcharge is applied to all income earned above the minimum wage rate.
The estimates from Finance Minister Maria Luís Albuquerque was that taxpayers could expect a 25% to 35% decrease in the income tax surcharge. How she was so way out with the figures remains to be explained but does she care, she is leaving her post on Friday.
The Ministry of Finance began to publish surcharge rebate estimates in July in the led up to the November election. Figures pointed to rebate of 19%.
The next month the estimate increased to 25% and the last ‘suggestion’ just before the general election was that taxpayers at last could expect a significant drop in the surcharge of 35%. 'Hurrah for fiscal probity and a well run economy,' was the pre-election coalition message.
A month after the election, the prediction for a tax decrease is 0%.
The failure by the Passos Coelho tax collection regime to hit tax targets shows a large crack in his reputation for fiscal rigour.
Speaking to RTP today, Passos Coelho rejected accusations that he had manipulated the figures and said that further explanations are available at the Ministry of Finance.
Paul Núncio's weak response to Parliament today was that the earlier figure was 'just a forecast, not a promise, “the methodology used for the monthly reporting of the tax credit may have contributed to create the wrong perception that it was a forecast for the end of the year, and not a promise.”
The two taxes chosen from which to calculate any reduction in the income tax surcharge seem, rather suspicously, to be the only revenue streams that are below target.
For overall tax revenue, Núncio reported that "the overall tax revenue is behaving well; to October it is above forecast for the full year, and if this continues to the end of 2015, tax revenue will be once again the highest ever recorded in Portugal."
