Socialists reject NHR and IUC road toll tax hike. (for now)
from its most controversial proposals included in the 2024 state budget to win favor with the Portuguese people ahead of early elections in March. However, the government, despite the ongoing political crisis, still has a majority in parliament and is single-handedly deciding on these amendments to its state budget proposals.
Changes to the tax regime NHR
With regard to the NHR tax regime, the new temporary scheme will allow individuals of any nationality to continue to benefit from the NHR tax regime (which was due to be abolished from 2024) until December 31, 2024, if they can prove that they were already planning to move to Portugal in 2023 (i.e. provide documents proving''purchasing real estate, applying for a residence permit or enrolling children in a Portuguese school). This 'transitional regime' was created as a result of a change to the 2024 state budget proposal presented in Parliament on Tuesday by the Socialist Party.
Justification and criticism of the decisionJustifying the abolition of the regime earlier this year, Prime Minister Antonio Costa said the NHR tax regime was "a measure of fiscal injustice that is no longer justified and is a biased form of pumping up the real estate market, whose prices have reached unsustainable levels." However, the SP government now believes it is necessary to create a "transitional period". "It is important to create a transitional regime that preserves''legitimate expectations of people who have already made the decision to immigrate or return to Portugal,' the party said in a statement. It adds that not creating this transitional scheme could "jeopardize the trust" of those who have chosen Portugal to live in. In fact, the NHR's new transitional tax regime extends it for another year, leaving the option for the next government to either move to repeal it, maintain it or change it.
Reaction of the real estate sector
Representatives of the real estate sector welcome the creation of a "transitional" NHR tax regime, but criticize the government for deciding to start abolishing it first. "When Prime Minister Antonio Costa announced the abolition (of the NHR regime), he said two things:''Uncertainty - even if the measure is eventually repealed - is a critical deterrent to any investment decision,' he told JE.
Change in vehicle circulation tax IUC
The government's sudden change in policy proved even more surprising when it came to the increase in the IUC vehicle circulation tax, which was canceled after Finance Minister Fernando Medina emphatically defended it on several occasions. In a statement justifying its decision, the PS said, "Passenger cars remain in many cases the main means of transportation to work or the nearest public transport stop, especially outside the country's major cities and''prompted by this measure, the PS clearly realized that it could be harmful and affect support for the middle class,' he told SIC Notícias. The Portuguese Automobile Club (ACP) also emphasized the "fear" that it believes prompted the government to reject the tax increase.
Justifying the abolition of the regime earlier this year, Prime Minister Antonio Costa said the NHR tax regime was "a measure of fiscal injustice that is no longer justified and is a biased form of pumping up the real estate market, whose prices have reached unsustainable levels." However, the SP government now believes it is necessary to create a "transitional period". "It is important to create a transitional regime that preserves''legitimate expectations of people who have already made the decision to immigrate or return to Portugal,' the party said in a statement. It adds that not creating this transitional scheme could "jeopardize the trust" of those who have chosen Portugal to live in. In fact, the NHR's new transitional tax regime extends it for another year, leaving the option for the next government to either move to repeal it, maintain it or change it.
Reaction of the real estate sector
Representatives of the real estate sector welcome the creation of a "transitional" NHR tax regime, but criticize the government for deciding to start abolishing it first. "When Prime Minister Antonio Costa announced the abolition (of the NHR regime), he said two things:''Uncertainty - even if the measure is eventually repealed - is a critical deterrent to any investment decision,' he told JE.
Change in vehicle circulation tax IUC
The government's sudden change in policy proved even more surprising when it came to the increase in the IUC vehicle circulation tax, which was canceled after Finance Minister Fernando Medina emphatically defended it on several occasions. In a statement justifying its decision, the PS said, "Passenger cars remain in many cases the main means of transportation to work or the nearest public transport stop, especially outside the country's major cities and''prompted by this measure, the PS clearly realized that it could be harmful and affect support for the middle class,' he told SIC Notícias. The Portuguese Automobile Club (ACP) also emphasized the "fear" that it believes prompted the government to reject the tax increase.
Reaction of opposition parties
While speaking to reporters in Parliament, PSD MP Hugo Carneiro emphasized that all opposition parties have called the proposal "an injustice against the middle and most vulnerable classes," recalling that the government justified it on environmental grounds. "At the end of the day, this argument co'. 'by the PS and the government was false. There was no environmental concern here; there was only a desire to increase taxes for the Portuguese (...) What is the real reason for this change of policy? Elections!" - he said. According to the PSD, it was "never an election issue, but a social justice issue" for all citizens who have old cars "because they can't afford" new ones. Iniciativa Liberal (IL) party president Rui Rocha also called the PS change "totally opportunistic." "It's a disgrace that they waited so long for the election campaign to make this change. It's total hypocrisy, pure opportunism, pure and hard electoral campaigning," he said. Nevertheless, both parties welcome the change''as a "citizens' victory" after several protest movements took to the streets against the IUC increase, including a petition that gathered the highest number of signatures in the country's history (over 403,000).
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