Portugal Unveils “Enormous” Tax Hikes As Part Of Harsh Austerity Budget

October 16, 2012Portugalby EW News Desk Team

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The Portuguese government on Monday revealed the final version of its austerity package, which will see “enormous” tax increases across-the-board and a reduction in pensions and social benefits.

"The proposed budget is the only one possible ... we don't have any room for manoeuvre," told Finance Minister Vitor Gaspar to journalists after submitting the budget bill in parliament.

“Portugal has to stay the course,” he added, while admitting that "the 2013 government budget is a tough one for Portuguese," while, “the increase in the tax burden is enormous."

According to the BBC, the Portuguese government will be introducing a special 4 percent levy on earnings, while reducing the number of bands for income tax from eight to five. Capital gains tax is also set to increase from 25 percent to 28 percent, with government spending cuts estimated to be worth close to 2.7 billion euros next year, while at least 2 percent of the nation’s 600,000 civil servants will be laid off.

Gaspar warned that "calling into question the budget will call into question aid" under the country's bailout program. He also confirmed that the average income tax rise would increase from 9.8 percent in 2012 to 13.2 percent next year; but said that the budget was “the most fair in terms of fiscal equality.”

Antonio Jose Seguro, head of the opposition Socialist Party, however has described the latest budget as " a fiscal atomic bomb.” The main trade union CGTP said that the budget was "an attack on the dignity of the people,” while even Portuguese President Anibal Cavaco Silva, who comes from the Social Democrat Party of Prime Minister Pedro Passos Coelho, has expressed concern.

"In current circumstances, it is not right to require a public deficit target from a country undergoing a process of budget adjustment which it is respecting come what may," he said on his Facebook page, as cited by NineMSN.

According to the Associated Press, the draft budget for 2013 is one of the harshest in the country's recent history and is expected to take away the equivalent of a month's wages from many workers. The government though chose to push ahead with its austerity budget despite having to backtrack on an initial package of measures last month.

Related: Europe’s Man-Made Disaster – An Austerity Tragedy: Joseph Stiglitz

Related: Will Austerity Make Inequality Worse? : Ortiz & Cummins

Related: Infographic: Austerity – An Epic Failure?

Speaking in a televised interview, as cited by the Wall Street Journal, ex-Portuguese president Jorge Sampaio (1996-2006) said that while austerity was necessary to fix the country’s problems, Portugal still had to re-negotiate with Europe for more time and “perhaps more money.”

"At this point, everyone has realized that austerity is destroying the country, the Portuguese and their hope, their rights and could even destroy democracy itself," Sampaio said.

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