Major Tax Proposals from the PS for 2024
The Portuguese Socialist Party (PS) has put forth new proposals aimed at reshaping the country's tax landscape, despite being in opposition. These measures are projected to impact the fiscal landscape by around €730 million. Here’s a breakdown of the key initiatives:
Changes to the IUC Tax
In 2023, a proposed increase in the Vehicle Tax (IUC) was set to affect approximately three million vehicles. The initial plan would have led to increases of up to 1000% for certain older cars. However, due to public backlash and impending elections, the PS has retracted this proposal, focusing instead on fairness in taxation for vehicles purchased before and after July 2007.
New Incentives for Electric Vehicles in IRS
The PS aims to encourage the purchase of electric and hybrid vehicles by offering a 50% VAT refund on vehicles costing up to €40,000. This initiative, similar to existing corporate incentives, seeks to make electric vehicles more accessible to private buyers. For instance, a €40,000 vehicle could yield a €4,600 deduction in IRS, based on the 23% VAT.
Reduced VAT on Electricity
Another significant proposal is to extend the 6% VAT rate on electricity consumption for clients with contracted power up to 6.9 kVA. This initiative aims to include over 5 million consumers and represents a continuation of past efforts to lower energy costs. This measure is calculated to cost an additional €100 million.
New Savings Program for Newborns
The PS has introduced the “Pé-de-Meia” program, which offers €500 in savings bonds for every newborn in Portugal, redeemable at age 18. While this initiative aims to support families, experts suggest its impact on public debt will be minimal, only reflecting on the budget when the bonds are cashed in.
Gradual Reduction of Tuition Fees
Finally, the PS proposes a gradual reduction of tuition fees in higher education, with the goal of complete elimination over the next decade. This measure contrasts with the current government's stance, which leans towards increasing tuition fees.
These proposals from the PS are part of a broader strategy to address economic challenges while aiming to support families and promote sustainable practices in vehicle purchases. The financial implications and effectiveness of these measures remain to be seen as Portugal heads towards elections in early 2024.
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