Tags: Portugal | Hikes | Taxes | Cuts | Pay | debt

Portugal Hikes Taxes, Cuts Politician Pay to Fight Debt

Thursday, 13 May 2010 12:43 PM

Portugal is hiking taxes and cutting politicians' pay in a fresh effort to allay market fears about its high level of debt.

Prime Minister Jose Socrates announced Thursday that income tax will rise between 1 and 1-5 percent and sales tax will increase to 21 from 20 percent.

Corporate tax will increase 2.5 percentage points for companies reporting annual profits of more than 2 million euros ($2.52 million).

The salaries of politicians and public company bosses, meanwhile, will be cut by 5 percent.

Socrates said after a Cabinet meeting that the measures will remain in place through 2011, by which time he expects the budget deficit to be 4.6 percent. Last year it stood at 9.4 percent.

The announcement came five days after the European Union unveiled a financial package to help debt-burdened countries out of trouble. At the same time, Europe's leaders demanded vulnerable countries — like Portugal — make an extra effort to lower their debt levels.

Portugal announced an austerity plan earlier this year, but it failed to satisfy markets and its international credit rating was cut.

"These additional measures are fundamental for Portugal, to defend our country, to defend our economy, to ensure its financing," Socrates said.

"The world has changed — and how — over the past two weeks," he said.

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Portugal is hiking taxes and cutting politicians' pay in a fresh effort to allay market fears about its high level of debt. Prime Minister Jose Socrates announced Thursday that income tax will rise between 1 and 1-5 percent and sales tax will increase to 21 from 20...
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