Portugal plans higher transactions tax, pension cuts

Fri Oct 12, 2012 8:28am EDT
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By Sergio Goncalves

LISBON (Reuters) - Portugal's 2013 budget plans to impose a financial transactions tax of up to 0.3 percent and to cut pensions next year, going well beyond a proposal from the European Commission which floated a tax rate of just 0.1 percent.

Eager to reassure international lenders - who are underpinning its 78-billion euro bailout - recession-hit Portugal is trying to follow in Ireland's footsteps and to make a full return to global bond markets to fund itself.

There are signs it is close to achieving that goal with lower yields but anti-austerity protests and issues over the economy's longer-term competitiveness risk undercutting those efforts, while banks are warning that a transaction tax would put Lisbon at a disadvantage to rivals such as London.

Portugal's economy also remains in a sickly state and this year entered its deepest recession since the 1970s with unemployment at record highs of above 15 percent.

In the budget blueprint, a copy of which was obtained by Reuters, the government requests parliament's permission to tax the "acquisition of securities at a rate that can reach a maximum of 0.3 percent", but does not provide further details.

Struggling to meet the fiscal terms of the European Union/International Monetary Fund-backed bailout after a steep recession undercut tax revenues in 2012, the government will present the draft budget to parliament on Monday.

It will include previously-announced income tax hikes.

The countries' creditors agreed to relax Lisbon's budget goals last month but the government has indicated it will still be tough to even meet the new targets.   Continued...