Madeira Government Announces 30% IRS Reduction at All Levels by 2028

The regional government of Madeira announced this Wednesday that it will apply the 30% tax difference to all IRS levels until the end of the legislative term in 2028, stressing that the reduction will be extended to level 5 this year.

“The tax cuts are therefore an important moment for this regional government to fulfil the promises made regarding the financial balance of families and support for companies,” said Finance Minister Rogerio Gouveia, indicating that in 2024 the effect would be 170 million euros, of which 99.7 million would come from personal income tax (IRS).

The government official was speaking in the plenary session of the Legislative Assembly of Madeira at the beginning of the debate on the draft budget of the region for 2024 with a global value of 2.195 million euros, the first of which was presented by the executive power of the Social Democratic minority and previously negotiated with the opposition parties.

“After we applied the maximum IRS rate reduction to Bands 1 through 4 in 2023, which will be maintained this year, we are now applying that 30% reduction again to Band 5,” he said, and then ensuring that this tax break, provided by the Regional Finance Act, will be extended to all IRS levels by the end of the Legislature.

Rogerio Gouveia said the budget proposal reaffirms the regional government’s “commitment to lower taxes” but refused to include the financial measures outlined by most opposition parties, which advocate a 30 percent cut in all taxes already in force in 2024.

“The enormous damage they will cause to the regional treasury, around 160 million euros, will have an impact and call into question the support the government provides to the population,” he said.

However, the finance minister clarified that the budget includes a 1% reduction in the reduced VAT rate, which will increase from 5% to 4% for more than 60 goods considered essential, with an estimated annual effect of €6.3 million.

It is also planned to reduce VAT on electricity for consumption at an intermediate rate to 3.6 million euros.

“The decision not to change VAT any further at this time represents a responsible step by the regional government in the sense that taxes cannot be reduced at the same time without jeopardising the sustainability of regional public finances,” he said.

Presenting the budget to a semicircle of 47 MPs from seven parties – PSD (19), PS (11), SEP (nine), Chega (four), SDS-PP (two), IL (one) and PAN (one) – Rogerio Gouveia indicated that the value of the allocations allocated to areas of social impact amounted to more than 1,100 million euros, with a focus on education, health and housing.

In particular, 10.6 million euros were allocated for the digitalisation of education and free first-cycle school textbooks, 2.1 million for support of youth organisations, 14.4 million for programmes to promote and disseminate creativity and 3.6 million for amateur sports.

In the health sector, €11 million has been allocated for post-surgical recovery and access to health care programmes, €1 million for the creation of the first paediatric palliative care unit, €1 million for a home hospitalisation project and €1.2 million for a new personalised medicine preparation project.

Rogerio Gouveia also highlighted a number of social support measures, including strengthening the Regional Supplement for the Elderly, which will increase from 80 euros per month to 110 euros, with a total investment of 4.9 million dollars.

In terms of housing, the 2024 budget has allocated €111 million to stimulate the acquisition, construction and renovation of housing, €63 million more than in 2023.

Rogerio Gouveia, on the other hand, stressed that the change in the distribution of the isolation benefit to a “more fair and equal regime” has been increased to a fixed amount of 662 euros, regardless of the worker’s monthly salary.

“These are realistic options that we present so that Madeira is better prepared to face future challenges,” he said, before adding: “Ease and demagogic popularity have no place on our path, so we hope that, in the interests of the debate in the specialty, the opposition does not indulge in utopia and easy promises.”

The final global vote on Madeira’s 2024 budget and investment plan proposals is scheduled for Friday.

Although the XV Regional Government’s program for the 2024-2028 legislative body includes 19 measures indicated by the four opposition parties with which the executive has negotiated – Chegoy, CDS-PP, IL and PAN -, the direction of their vote in the budget is not yet clear, with the exception of CDS-PP, which signed a parliamentary protection agreement with the Social Democrats.