Portugal’s austerity budget

Portugal’s parliament is to vote on Tuesday on a budget containing unprecedented measures to achieve savings of 5.3 billion euros, with 80 percent of the amount to come from increased tax revenue.

– Revenue-boosting measures

The government hopes to raise 2.8 billion euros in extra revenue by increasing tax rates and cutting the number of income brackets from eight to five. The lowest tax rate is to rise to 14.5 percent and the highest to 48 percent.

The government also plans to bring in a flat-rate surtax of 3.5 percent on the income of all citizens, a “solidarity tax” on incomes of over 80,000 euros per year — with a higher rate above 250,000 euros — and a rise in taxation on income from capital.

Duties on consumer goods and on certain property assets are also due to go up, as are contributions for employees’ social charges.

– Spending cuts

The government intends to slash the number of state employees by 2 percent and to make major cuts to social benefits.

In particular, unemployment benefit is to be cut by 6 percent and health benefits by 5 percent. A freeze on current pensions is also to be maintained, except for people with very low pensions.

The new budget is based on expectations of a one-percent drop in gross domestic product this year, following on from a three-percent decline this year.

Unemployment is expected to reach a record level of 16.4 percent.

The government also expects Portugal’s public debt to rise to 123.7 percent of GDP by the end of 2013.