Taxpayers Receive Unexpected Returns of Over a Billion Euros

Return on tax income

Published on

Amidst the introduction of new taxes and the increase in old taxes in Portugal, taxpayers have a bit of good news coming their way. The Portuguese government is finally making massive returns on tax income receipts from previous years.

The amount – over a billion Euros – will be given on a staggered basis to the concerned taxpayers. As of today, 1.5 million taxpayers will be receiving their returns on tax receipts while the remaining 200,000 taxpayers will receive theirs by next week.

According to the finance ministry, the total amount paid to the 1.5 million taxpayers has amounted to over €1,100 million. With the release next week, the finance ministry is expected to disburse a lesser albeit still substantial amount to the remaining taxpayers.

The payments have already been processed and approved but the snag in actual disbursement appears to come from the government’s reluctance to do so. The government has been hanging on to the payments while “waiting for payment authorization”.

In a press statement released by the government, it stated that "according to information provided by the tax authority, all income tax refunds are being made as normal and are being processed and paid after validation."

Many taxpayers are tempted to say that it may well be a case of the right hand not knowing what the left hand is doing.

Luis Morais Sarmento, the Secretary of State for Budgeting, could not give his official statement pending the definitive statement from the tax department of the Ministry of Finance.

On the other hand, Pedro Filipe Soares, deputy of the Left Bloc, said last week that the retention of refunds partially accounted to the recent impressive growth in government taxes collected in 2012.

As previously mentioned, the news is a ray of hope for Portuguese citizens but that may as well be just that – a ray of hope. The government, by contrast, is understandably on tenterhooks because of the country’s current economic situation, which the outflow of cash via the tax refunds may worsen.

Like most countries in Europe, Portugal has not been spared the negative effects of the debt crisis, which began in Greece. The country already has a heavy debt burden coupled with rising interest rates, among other economic woes.

To counteract these effects, the Portuguese government has already adopted three rounds of austerity measures – perhaps, the highest number in many European countries. The economy is now in a recession so much so that it received a bailout from the International Monetary Fund and the European Union – the third European country to do so after Greece and Ireland.

Said bailout was made in May 2011 to the tune of €78 billion (approximately $97 billion).

The tax refunds may be sufficient for a few days of expenses on the part of taxpayers but the slow economic growth characterized by tax increases, budget cuts and loosened labor laws will quickly offset said benefit.

As for the government already being strained by scarce resources, high interest rates on debts and junk credit status rating, the billions of tax refunds place greater pressure.

The Portuguese, in a clear demonstration of their national character of forbearance and resilience, have endured the austerity measures. This attitude has been in marked contrast with other European nations where civil unrest has been the norm, as is true in Greece and the United Kingdom.


http://www.portugalproperty.com - Portugal's largest real estate agency - If you love Portugal you will love Portugal Property. Contact the team via email at: info@portugalproperty.com or call free now on +44 (0) 800 014 8201

Published in: Taxation