Tax Hike And Budget Cuts: Protesters Start Fire
In Front Of Portuguese Parliament
By Countercurrents.org
16 October, 2012
Countercurrents.org
Demonstrators started a fire outside the Portuguese parliament at night of October 15, 2012 as anti-austerity protests continued in Lisbon. They raised slogan: "The people united will never be defeated". About 2,000 protesters in front of parliament called for the resignation of the government. Protests are now frequent in the country.
The General Confederation of Portuguese Workers has announced a general strike against austerity on November 14. Portugal's main trade union, the CGTP, said it was "an attack on the dignity of the people". Antonio Jose Seguro, opposition Socialist Party leader, described the draft budget as "a fiscal atomic bomb". Diario Economico, a daily newspaper, commented: it’s "an insult to the Portuguese people".
The protest started in reaction to the draft budget for 2013, one of the harshest in the country's recent history. Finance Minister Vitor Gaspar confirmed the average income tax would increase from 9.8% in 2012 to 13.2% next year. The income tax rise amounts to a month's wages for many workers. There will be a one-off 4% surcharge tax on all workers' earnings in 2013.
Gaspar announced spending cuts worth 2.7bn euros next year, which would include laying off 2% of 600,000 public sector employees. Gaspar said the budget was the only way to meet the country’s targets under the bailout. "We have no room for maneuver," he said. "Asking for more time [under the bailout] would lead us to a dictatorship of debt and to failure."
With the unemployment rate above 15%, the country is passing through its worst recession since the 1970s. Portugal was granted a $100bn bailout last year.
The IMF, European Central Bank and EU, the bailout lenders, recently eased the country’s budget deficit target for this year to 5% from 4.5%.
The tax increases are particularly hard on middle class. Sharp income tax hikes could amount to up to two or three months' wages for middle-income workers, to ensure the country meets its budget goals under the bailout. Due to the changes, someone earning €41,000 a year will pay 45% income tax from Jan 1 compared with 35.5% now. Most workers fall into the €7,000-€20,000 annual income bracket. Those people will pay 28.5% income tax, up from 24.5% now.
Previously, the top rate of tax of 46.5% was for workers or married couples who together earned over €153,300 a year. That top rate will be lowered to cover single or joint earnings above €80,000, which will be taxed at a rate of 48%. That income will also be subject to a special "social solidarity" tax of 2.5%.
There will be a one-off 4% surcharge tax on everyone’s earnings in 2013, while capital gains tax will rise to 28% from 25%.
In recent national opinion polls, the ruling party has dropped to record lows since the last election in June 2011.
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