Portugal mulls higher income tax in bid to control its deficit

Julian Harris
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PORTUGAL’S government yesterday threatened it would have to hike income taxes after bowing to increasing pressure from protesters to scrap increases in workers’ social security payments.

Prime Minister Pedro Passos Coelho said his administration is forced to find ways to achieve budget targets that are conditions of the debt-burdened country’s ongoing bailout programme.

“As long as Portugal maintains its level of fulfilment, we know that we will have the support of our external partners,” Coelho said. “If we do not, we put at risk our fulfilment, and these guarantee mechanisms will cease to exist.”

Plans to increase social security contributions to 18 per cent from 11 per cent for all workers in 2013 sparked large protests, forcing the government into a U-turn.

Yet workers may also be hit by new plans, which could see income tax rise as well as downward pressure on wages for government sector workers in the struggling Eurozone state.