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Portugal imposes 50% levy on part of bonus pay

The Portuguese government on Thursday said it would impose a special 50 percent levy on annual salary bonus payments as part of austerity measures to help balance the public finances.

“The government is preparing an extraordinary measure to help in adjusting the budget which will cover all revenues subject to income tax,” newly-elected Prime Minister Pedro Passos Coelho told parliament.

“This measure, which still needs to be finalised, will be submitted in the next two weeks. I can tell you, however, that it envisages a levy of 50 percent on the Christmas bonus for those earning more than the minimum wage,” he added.

“The state of the public finances forces me to ask for even more sacrifices from the Portuguese public,” he said.

Before the address to parliament, the prime minister had warned that his proposals would sober up the country after a debt binge which forced Lisbon to seek an EU-International Monetary Fund bailout earlier this year.

The EU and IMF agreed a 78-billion-euro ($112-billion) debt rescue plan with Portugal in April, after earlier bailouts for fellow eurozone strugglers Greece and Ireland.

In return for funding, Lisbon agreed to cut its public deficit to 5.9 percent of gross domestic product by the end of the year from more than 9.0 percent in 2010 and to bring within the EU limit of 3.0 percent of GDP by 2013.

Associated budget cuts under the three-year aid package are expected to cause the Portuguese economy to contract by around 2.0 percent this year and next.