The Council of Ministers today approved a change to the rates on the IRS brackets, after the government signaled that the tax reduction in force since January is 1.191 million euros, less than initially estimated.
This new figure, mentioned by the Minister for Parliamentary Affairs, Pedro Duarte, during the urgent debate requested by the PS, compares with the 1,327 million euros in the report on the State Budget for 2024 (OE2024) as the expected impact in 2024 of the reduction in personal income tax approved at the time.
In the meantime, an official source from the Ministry of Finance told Lusa that “the new estimate of the impact in 2024 of the scale in force (1.191 million euros) is the result of updating this estimate with the most recent data available (which takes into account the 2022 declarations submitted in 2023)”.
The reduction in personal income tax recommended in the State Budget for 2024, the impact of which is estimated at 1.327 million euros, includes updating the tax brackets at a rate of 3%, increasing the amount exempt from tax (minimum existence) and reducing the rates in the first five brackets by between 1.25 and 3.5 percentage points.
The issue of reducing personal income tax entered the political debate last week during the discussion of the government’s program, when the Prime Minister, Luís Montenegro, announced the approval by the Council of Ministers of a bill to amend Article 68 of the Personal Income Tax Code.
“Firstly, next week [today] we will approve a bill that amends article 68 of the Personal Income Tax Code, introducing a decrease in personal income tax rates on incomes up to the eighth bracket, which will make up an overall decrease of around 1.5 billion euros in Portuguese employment taxes compared to last year, especially felt in the middle class,” said Montenegro.
A day later, Finance Minister Miranda Sarmento clarified that the 1.5 billion euros in personal income tax relief would not be added to the approximately 1.3 billion euros in tax cuts included in the State Budget for 2024 and already in force, stating that the measure, which was still being calibrated, should “exceed 200 million euros”.
Criticism from the opposition didn’t take long, with the leader of the PS talking about a “hoax”, “lies” and “fraud” and his parliamentary leader announcing an urgent debate on the subject, during which the Minister for Parliamentary Affairs returned the accusation, saying that the “hoax” was the debate.
The government’s intention is to reflect in the withholding tax tables the amendment to article 68 of the IRS Code [the article where the IRS brackets and the rates that apply to them are defined], and the executive has already stated that the reduction that will be approved does not include an increase in rates in any of the brackets, compared to the values in force since January.
In its electoral program, the AD coalition (made up of the PSD/CDS-PP and PPM) pointed to a budgetary impact of two billion euros for the reduction of IRS rates by between 0.5 and 3 percentage points (up to the 8th bracket) compared to 2023 and the exemption of contributions and IRS on performance bonuses (15th month).
