Major Fiscal Reform Proposed: Shifting Tax Burden from Labor to Property
A detailed policy analysis published in the newspaper Observador has proposed a fundamental restructuring of the Portuguese tax system, with a call to significantly decrease taxes on labor and substantially increase taxes on real estate assets. The proposal aims to address economic inequality and stimulate productivity.
The policy objective, as outlined by the author, is to correct a perceived imbalance where income from work is heavily taxed, while wealth held in real estate is taxed at a very low effective rate. The author argues this dynamic stifles social mobility, discourages work, and contributes to Portugal's low birth rate and youth emigration.
The implementation strategy would involve a major reform of the Municipal Property Tax (IMI). The proposal suggests that IMI should become a primary source of national revenue, not just a municipal one. The core of the reform would be to update the taxable value of all properties to reflect their current market value, instead of the currently used, often decades-old, valuations. The increased revenue from this new property tax would then be used to fund significant cuts to both personal income tax (IRS) and social security contributions.
The affected population groups would be, on one hand, all workers, who would see their net salaries increase. On the other hand, property owners, especially those with multiple, high-value, or vacant properties, would face a higher annual tax liability. The proposal includes a provision for a deduction on a primary, permanent residence to protect homeowners, with the deduction potentially increasing based on the number of people in the household.
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The budget allocation would be rebalanced, with property taxes growing from representing just 2.5% of fiscal revenue to a figure estimated to be as high as 20%. The author calculates that bringing taxable values in line with market reality and setting a new rate of around 0.5% could increase IMI revenue eightfold. This would be sufficient to cut income and social security taxes by up to half.
There is potential for broad political support. The proposal is framed to appeal to the political Left by 'making the rich pay more' through wealth taxation, and to the political Right by promoting meritocracy through lower taxes on income. The expected economic impact includes incentivizing the sale or rental of unused properties, which could increase housing supply and moderate prices. It would also reduce the appeal of real estate as a purely passive investment.
The social impact would be to reward labor and make it easier for working individuals and families to increase their disposable income. The author presents this as a solution to a range of issues, from economic stagnation to demographic decline. The proposal is now in the public domain, sparking debate among policymakers and economists. Understand policy impacts on your Portugal property plans at realestate-lisbon.com.