As part of its continuing economic recovery programme and exit this month from its €78bn Euro bail out plan, Portugal has submitted a range of new austerity budget measures for 1st January 2015. This includes a rise in the Standard Portuguese VAT rate from 23% to 23.25%
Portuguese VAT rate increases
As one of the countries at the hear of the € currency crisis, Portugal has been forced to raise VAT twice already. Portuguese VAT rose from 21% to 23% January 2011. This followed an increase in Portuguese VAT from 20% to 21% in July 2008.
This latest increase proposal comes as the country continues a rapid economic revival – its faced the prospect of a second bail out just six months ago from the ‘Troika’, which includes the IMF, ECB and EU. It is now able to join the global bond market again to raise funding, bringing in €750m 10 year bonds this week with a very low yield of 3.575. Portugal’s exit from the emergency funding bail out follows Spain and Ireland’s exits.
Aside from the VAT rise, there will also be a rise in the employees social security contribution. The aim is to reach a 2.5% deficit target (the Euro currency requirement is for 3% of GDP deficit maximum).