Has the tax rate gone up?

[EMM]

Algarve politicians and business organisations feel as we do about many of the recent changes and YES they are Ignored.
I have heard Algarvians referred to as Arabs by some in the North. Lisbon and the North ares where the wealth and power is , as far as they are concerned that Algarve only has oranges and tourism.

[HampshireRich]

Decisions are made in Brussels by Eurocrats & the Troika who just granted Portugal a further 7 year extension to their debt repayment. This of course was subject to certain conditions - a further €600 million of austerity measures - predominantly affecting health, education and social budgets.

The euro project has proven disastrous for southern european countries & the sooner one of them defaults the sooner this disaster will be over. Portugal's debt is 123% of GDP & the economy is shrinking & the debt increasing. There is no way they can trade themselves out of this mess.

The southern european countries were happy to take a wedge of the Euro cash at the time, and although I concur with most of widge's comments above, it's not quite what I was thinking. In the UK, the austerity measures impacted the country as a whole, although it appears as usual London and the South seem to be able to recover quicker. However, some respite was given to "poorer" areas and interest rates were slashed independently of what the Central EU Bank did. In Portugal, it seems that measures to pay back the debt seem to be those that Lisbon and the wealthier parts can absorb with no consessions given to areas such as the Algarve that rely mainly on non-industrial, non-trade or non-financial sources of income - in the Algarve's case, tourism. Where you have a region whose major source of income is dwindling it seems odd to make those businesses pay more tax. I can understand the desire of the authorities to ensure that previous lax means of revenue are tightened -eg ensuring that people who rent out their villas as a business pay the correct taxes (apologies if that upsets anyone) but to keep raising the tax rates on a shrinking number of businesses will, I feel, chase more of them away and further reduce the income to the state. Surely it makes more sense to receive 20% tax on £100 million than 28% tax on £50 million - or am I being too simplistic here?

[widge]

Point well made Rich. There is a direct correlation between the effective rate of tax and the level of avoidance (particularly by the rich) this is legal and understandable (unless you're Ed Balls).

Tax evaders,however, are a scourge on society forcing governments to apply unnecessarily high rates of tax on law abiding compliant people through their selfish & greedy actions. Foreign tax evaders (such as those Brits who don't declare their rental income) are even worse as they inflict an additional burden on their host nation as opposed to their country of domicile.

The Algarve is inhabited by thousands of foreign nationals & second home owners who should make a contribution to the Portuguese coffers through direct taxation as well as indirect tax on purchases of good & services. I suspect the majority do but how much lower might the rate of tax be if everybody declared their income honestly ?

[widge]

But I also stand in wonderment at the stupidity of some of the PT efforts to get out of this crisis, and suddenly Cameron and co seems to be quite good team

QE has had a significant effect in UK with savers being hit in order to help borrowers from defaulting on debt. Some claim QE is equivalent to 25% of GDP & will never be reversed, Portugal & other EU countries never had the option hence the additional pain & austerity.

[EMM]

I have seen the following , not sure if it agrees or conflicts with previous posts.

Update for 2014 The PT government has INCREASED the percentage allowance before tax on short term lets covered by a AL Licence.

Under the simplified Tax Scheme the allowance for 2013 is 80% of turnover calculated as expenses , 20 % classed as taxed profit @ 25%.

For 2014 the allowance has increased to 85% so 15% now classed as taxable profit @25 % = 3.75% 0f gross income

The 25% rate applies to NON Residents
For 2014 the % pofit is added to any other income and taxed accordingly.

EG 2013 rental income E10,000, 80% expenses allowance E8000. profit E2000, tax @25% = E500.
2014 E10,000 85% expenses allowance E8500 prodit E1500 tax @25% = E375.

For NON residents if the tax rate is 28% then the tax due is pro rata..

[widge]

Sounds like good news to me. Having registered for the simplified tax regime for 2013 onward hopefully - as your example shows - it might reduce my tax bill further in 2014!

Is the reduced rate conditional on evidencing an AL licence ? Silly question probably as if you ain't got a licence you're hardly likely to declare your rental income.

[EMM]

I think that you have answered your own question

[widge]

I think that you have answered your own question

………..and I always seem to give myself the right answer !