Paula Franco emphasized the necessity of the reduction since the intervention of the ‘troika,’ noting that the IRS, particularly concerning employee income, has seen significant increases. One of the significant updates in the recently approved reduction by the Council of Ministers is its coverage up to the eighth tax bracket.
The adjustment, explained by Franco, applies to higher incomes but primarily targets the middle class, which bears most of the income tax burden. She pointed out that the workers affected are those with higher earnings due to their performance and skills, who have not been included in recent IRS reductions.
While describing the measure as positive, Franco cautioned that the government’s announced adjustment in IRS withholding rates will impact the final tax settlements.
“Previously, excess withholding resulted in taxpayers advancing more money to the state, leading to IRS refunds. With adjusted withholding tables, these advances will more closely match the final payment, reducing the expectation of significant refunds,” she emphasized.
The Council of Ministers approved a law on Wednesday for an additional IRS reduction amounting to 500 million euros, to be implemented this year, now submitted to parliament.
A Council of Ministers statement highlighted the proposal permits new tax relief by further reducing marginal rates up to the 8th bracket. The government aims to align withheld tax amounts as closely as possible with the final due amounts.
Luís Montenegro, the Prime Minister, noted in a Wednesday night RTP interview that this marks the third IRS reduction under his leadership, committing to continue such measures throughout the legislative term.
The proposal aims to increase disposable income beyond the 2025 State Budget forecasts, benefiting all families, especially the middle class. The government emphasized that lower and middle-income families will experience greater tax relief than anticipated for 2024.
