LISBON, 11th April, 2024 (WAM) -- Portugal's new minority government will approve tax cuts for the middle class worth 1.5 billion euros ($1.6 billion) next week in an effort to spur slowing growth and investment, Prime Minister Luis Montenegro said on Thursday.
In a statement carried by Reuters, he said, "(A) high and complex tax burden is an economic barrier that compresses wealth, limits productivity and job creation," during a speech opening a two-day parliamentary debate.
The government aims to cut income tax rates, with a focus on the middle class, by 0.5 to 3 percentage points from 2023 levels. At present, income tax rates vary between a minimum 13 percent and a maximum 48 percent across salary brackets, meaning that the effective rate for middle-class taxpayers can be 30 percent or more.
"We have to free up companies and workers. High taxes hinder the attraction of investment and block companies from paying higher salaries to workers," he said.
According to the OECD, in 2022 the tax burden on workers' income in Portugal was the ninth highest among the 38 OECD member countries.
The economy expanded 2.3 percent last year, a major slowdown from 6.8 percent in 2022, which was Portugal's strongest in decades amid a wider post-pandemic recovery. The Bank of Portugal has forecast 2 percent growth in 2024.