Portugal has introduced (paywall) a “crisis tax” — or rather a package of taxes on consumption, wages, and corporations, as part of a plan to cut its deficit and stave off crisis:
The extra spending cuts and tax rises announced by José Sócrates, the Portuguese prime minister, followed similar moves by Spain, Greece and Ireland.
They were part of a push by members of the european single currency to convince financial markets that they were tackling budget problems after this week’s €750bn emergency support plan for the eurozone.
“These measures are absolutely necessary to defend our country, Europe and the single currency,” Mr Sócrates said.
[. . .]
The austerity drive is designed to reduce the Portuguese budget deficit from 9.4 per cent of gross domestic product in 2009 to 7 per cent this year and 4.6 per cent in 2011. Portugal had initially targeted deficits of 8.3 per cent of GDP this year and 6.6 per cent in 2011. As part of the cuts, politicians and public sector managers will see their salaries fall five per cent.
The tax rises, which are being called a“crisis tax”, include a 2.5 percentage point increase in corporate tax to 27.5 per cent on annual profits above €2m, a 1 percentage point increase in value added tax to 21 per cent and increases of up to 1.5 percentage points in income tax.
Asked why he had broken a pledge not to increase taxes, Mr Sócrates said: “The world has changed, and how, in the past two weeks.”
The minority socialist government said it expected social tensions to increase as trade unions called for demonstrations. But it was confident that the protests would not turn violent.
1) We live in strange times when a “socialist” government has broken a pledge not to increase taxes in a country whose standard of living is heavily subsidized by a massive welfare apparatus.
2) Why did I not know the name of the Portuguese prime minister is Socrates? When these austerity measures inevitably fall short, I hope I’m the first to say, “any more bright ideas, Socrates?”