The government has broken the taboo and announced that it will now move forward with new withholding tables to reflect the IRS reduction signed into law this week by the President. The Treasury Department says the new tables will be in place effective in September and adds that a solution will be approved so that the tax reduction takes effect retroactiveGiven the withholding tax already applied to work income and pensions since the beginning of the year.
“Following the promulgation of AR Decree No. 7/XVI by the President of the Republic, which modifies the IRS rate table, the Government will approve new tax withholding tables that will reflect the reduction in IRS rates. The Government will also approve a mechanism to retroactively apply this reduction in IRS rates, which will take into account withholding taxes already applied to employment income and pensions. The new tax withholding tables should come into effect in September.”
The decision now known responds to the demand of the opposition parties, PS and Chega, which were decisive in approving the reduction of the IRS rates up to the sixth step. This approved initiative was approved despite the will of the Government, which had presented another proposal to Parliament. However, the production of effects this year always depended on the Executive because it was necessary to adjust the withholding tables to the new rates and the Government was never clear about what it intended to do.
Pedro Nuno Santos has already reacted by stating that it is “a decision that benefits the majority, in particular the middle class”, as, he adds, “the PS has always defended”. But for the PS leader “it is a natural result. There was no reason for the government to break its commitment to reduce the IRS this year”.
Today, the Portuguese benefit from a decision that benefits the majority, particularly the middle class, as the PS has always advocated. We guarantee a reduction in the IRS that distributes the money returned to families in a more fair way.
The Government’s decision to approve new…
— Pedro Nuño Santos (@PNSpedronuno) July 26, 2024
It was pointed out on several occasions that the reduction of the IRS was contrary to the brake rule that prevents the opposition from approving against the will of the Government measures that alter the assumptions of the Budget. The Socialists argued that their proposal had a budgetary impact comparable to that associated with the proposal made by the Government and which it intended to implement from July. Only “in a tantrum” would the Government not reflect this tax reduction, argued Pedro Nuno Santos and Alexandra Leitão.
The left is pushing for the IRS to be reduced this year. Pedro Nuño says that if this is not the case, the government will throw a tantrum
In the text justifying the promulgation of the IRS diploma, Marcelo Rebelo de Sousa argued that the “moment of impact of the measure on State revenues” depends on the Government’s regulation, through the establishment of withholding taxes, so it can also only have an impact in the next budget year.” Regarding this justification, Prime Minister Luís Montenegro challenged the parties that approved the measure to present a draft resolution to promote the application of the measure this year, which would be difficult or even impossible before the parliamentary recess.
According to simulations carried out by the consultancy firm Ilya when the measure was approved (in June), the biggest gains will be felt by taxpayers with a gross income of 3,000 euros, but everyone will benefit from an increase in monthly net income of between 6.4 euros and 28.7 euros. With retroactive effect to the beginning of the year, the gain perceived in the first months of application of the new rates should be greater.
PS won the IRS, but the effect of lowering rates this year depends on the Government
Source: Observadora
