About IRS. Minister of Finance called to the parliamentary Budget committee

On April 12, in an interview with RTP, the Minister of Finance, Joaquim Miranda Sarmento, clarified that the 1,500 million euros of IRS reduction, this year, announced by the Prime Minister, Luís Montenegro, would not, after all, be added to the more than 1,300 million euros of tax relief included in the State Budget for 2024 and already in force.

On that day, Friday, the Express had published in the headline: “Montenegro doubles IRS reduction by summer”.

Opposition parties then accused the Government of trying to deceive the Portuguese.

The Government, in a statement, considered “true and undeniable” that the reductions in the IRS would lead to a cut of 1,500 million euros compared to 2023 and argued that further reductions in IRS rates would be “budgetally irresponsible”.

The Executive also said that, if “some political or media actors” had supposed that there were more IRS reductions, this would only be responsible for them and added that reductions of higher values ​​would be “budgetally irresponsible”.

This Wednesday, Parliament discusses the Government’s proposal that changes IRS rates with all parties presenting alternatives, with the outcome of the votes being uncertain, taking into account the balance of forces in the Assembly of the Republic.

The Government’s proposal, approved by the Council of Ministers at the end of last week, includes a reduction in rates of between 0.25 and three percentage points up to the 8th income bracket, with the biggest drops (3 and 1.25 points) to affect, respectively, the 6th and 8th levels.

The solution displeased the PS, which accused the Government of focusing tax relief (counted at 348 million euros in 2024) on higher incomes, leading the socialists to move forward with a proposed amendment that focuses the most significant part of the relief on levels lower.

This Wednesday’s plenary session will also include initiatives from the remaining opposition parties, also within the scope of the IRS.

The announcement about fiscal relief was made by Luís Montenegro at the start of the debate on the program of the XXIV Constitutional Government, on April 11th.

“Firstly, next week we will approve a proposed law that amends article 68 of the Personal Income Tax Code, introducing a reduction in IRS rates on income up to the eighth bracket, which will make a global decrease of around 1,500 million euros in Portuguese labor taxes compared to last year, especially felt in the middle class”, cried the Prime Minister then.

A day later, the Minister of Finance, Miranda Sarmento, clarified that the 1,500 million euros of IRS relief would not be added to the approximately 1,300 million euros of IRS reduction included in the State Budget for 2024 and already in force.

Explanations on the reduction of public debt

The Budget and Finance Committee also approved the urgent hearing of former Finance Minister Fernando Medina, current PS deputy, to give explanations on the reduction of public debt.

The hearing was requested by the CDS-PP and had votes in favor from all parliamentary groups present, including the PS.

Last week, at the party congress, the parliamentary leader of the Christian Democrats announced this request, accusing the previous government, in which Fernando Medina was Minister of Finance, of having made an “artificial reduction” of the debt with “pension money”. .

Paulo Núncio said that the Technical Budget Support Unit (UTAO) “warned that the debt reduction carried out by the socialist Government in 2023 was merely artificial” and that “it was only made on account of money from the Social Security Financial Stabilization Fund and the Caixa Geral de Aposentações”.

Paulo Núncio considered this situation “of enormous gravity” and that the former minister has to answer to Parliament.

Also last week, UTAO warned that the reduction in public debt in 2023 was “artificial” and that there are cases in which financial management options were conditioned by guidelines from the past Government.

The public debt ratio stood at 99.1% of Gross Domestic Product (GDP) in 2023 and in nominal terms decreased by 9.3 billion euros compared to the previous year, to 263.1 billion euros.