Property taxes could increase as Portugal debt problems continue

  • 14 years ago
  • Uncategorized
Are you thinking of buying in Portugal? If so, you could face higher property taxes under austerity measures being considered by the Portuguese government. Portugal is suffering from similar debt problems to those which enveloped Greece recently and the Organisation for Economic Cooperation and Development (OECD) has urged the nation to shore up its public finances.
Government should ‘be prepared to raise taxes’
In a recent report on Portugal, the OECD said: “The immediate challenge is to foster investor confidence by rapidly consolidating the public finances.” They urged the Portuguese government to take action ‘swiftly’ and encouraged them “to raise taxes, focusing on those that are the least distorting to growth, such as consumption and property taxes.
Income taxes, for example, have a direct impact on people’s spending as it reduces the money in their pockets. Property taxes, however, have less of an impact on the growth of an economy as they are charged on the transaction.
Huge Portuguese debt
Portugal’s public debt is expected to increase this year to more than 142 billion euros. This is 86 per cent of the country’s gross domestic product, well beyond the 60 per cent maximum stipulated by EU and eurozone rules.
The Socialist government is also tackling an annual public deficit of 9.3 per cent of output. It has committed to cut this to 7.3 per cent this year and 4.6 percent in 2011 through a programme of measures based on spending cuts and an overall tax rise in 2010.
Political opposition to property tax rises
However, the Portuguese minority government is struggling to pass its proposals thanks to opposition from the centre-right parties. The opposition opposes another set of tax increases, including higher property taxes.
However, OECD Secretary-General Angel Gurria believes Portugal will successfully combat its debt problems. “I am confident Portugal will weather this crisis,” he said. “The ambitious fiscal consolidation strategy must be backed by a strong political consensus, which the country has in the past been able to achieve.”

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