The government today approved changes to IRS rates

This Friday, the Council of Ministers approved the change in IRS rates after the government made it clear that the tax cuts in force since January amount to 1.191 million euros, which is lower than the original estimate.

This new cost, mentioned by the Minister of Parliamentary Affairs Pedro Duarte during the urgent debate requested by the PS, is compared with the 1.327 million euros that appears in the State Budget Report 2024 (OE2024) as the expected impact in 2024 then the IRS cut was approved.

However, an official Treasury source told Lusa that “the new impact estimate for the current table (€1.191 million) for 2024 is the result of updating this estimate to take into account the latest available data (which takes into account 2022 Declarations submitted in 2023).”

The IRS reduction recommended in OE2024 and the impact of which was recorded at the above-mentioned 1.327 million euros includes an update of the 3% rate brackets, an increase in the tax-free value (minimum existence) and a reduction in the rates in the first five brackets being between 1.25 and 3.5 percentage points points.

The issue of cutting the IRS entered the political debate last week during the discussion of the government program, when Prime Minister Luis Montenegro announced the approval by the Council of Ministers of the proposed law to amend Article 68 of the IRS. Code.

“First of all, next week we will approve [hoje] proposed legislation that amends Article 68 of the Personal Income Tax Code, introducing a reduction in IRS rates for incomes up to group eight, which will lead to an overall reduction in labor taxes in Portugal of approximately 1,500 million euros compared to last year, particularly noticeable in middle class,” Montenegro said.

A day later, Finance Minister Miranda Sarmento clarified that the €1,500 million IRS relief will not be added to the approximately €1,300 million in tax cuts included in the 2024 state budget and already in effect, clarifying that the measure is still being calibrated , should “exceed 200 million euros.”

Criticism from the opposition was not long in coming: the PS leader spoke of “hoaxes,” “lies,” and “fraud,” and its parliamentary leader announced an urgent debate on the topic, during which the public relations ministers returned. charge, which stated that a “hoax” was the subject of discussion.

The government’s intent is to reflect the change in IRS Code Section 68 in income tax schedules. [o artigo onde estão definidos os escalões do IRS e as taxas que sobre eles incidem]However, the executive branch has already mentioned that the reduction that will be approved does not include an increase in rates at any level compared to the values ​​​​in force in January.

In the election program, the AD coalition (formed by PSD/CDS-PP and PPM) indicated a budgetary impact of two billion euros for reducing IRS rates by 0.5–3 percentage points (to 8th step) compared to 2023. and fee and IRS waivers for performance bonuses (15th month).