Former Finance Minister Maria Luís Albuquerque Would Reverse Capital Income Tax Hike
European Commissioner and former Portuguese Minister of Finance, Maria Luís Albuquerque, stated on Tuesday that if she were to return to her former government post, she would reverse the increase of the flat tax rate on capital income from 21% to 28%. The statement was made during the PSD party's Summer University event, where she identified the tax hike as a decision she regretted making during her tenure from 2013 to 2015.
The policy in question, which affects income from interest, dividends, and property rentals, was implemented during the period of international financial assistance to Portugal. Albuquerque, who now serves as the European Commissioner for Financial Services, explained that the measure was a necessity of the time, driven by the need to increase state revenue under the terms of the 'troika' agreement. However, she now views it as the 'wrong incentive' for a country that needs to foster savings and investment.
During her address, Albuquerque was asked what she would change about her past economic policies. 'There is one measure that I really disliked taking and that today, with the functions and responsibility I have, I like even less: it was when we increased the flat tax rate from 21% to 28%,' she responded. She emphasized that while the decision was justified by the difficult economic context, it sent the wrong message about the importance of capital formation for the country's future.
The former minister clarified that a return to national politics is not in her plans but stressed the symbolic and practical importance of reversing the measure. 'I'm not saying it would be easy, but precisely because of the message it sends and the incentive it gives for behaviors that I think are important for the future of our citizens and our companies,' she defended. This perspective aligns with her current European responsibilities, which focus on creating a unified and competitive single market for capital and investment across the EU.
Albuquerque's comments introduce a significant point of debate into Portugal's current political and economic discourse. The 28% flat tax has been a cornerstone of the fiscal regime for capital gains and investment income for over a decade. Any official move to alter it would represent a major policy shift with wide-ranging effects on the national economy, from individual savers to large-scale foreign investors.
The government has not yet officially responded to the former minister's remarks, but the issue is likely to be taken up by opposition parties and economic analysts. The discussion centers on balancing fiscal revenue needs with the goal of creating a more attractive environment for both domestic savings and foreign investment, a key challenge for Portuguese policymakers.
As part of her current role, Albuquerque mentioned that the European Commission will soon present recommendations to member states aimed at improving financial literacy and creating accessible savings and investment accounts, potentially supported by tax incentives. This European-level push could further influence the debate within Portugal regarding its own tax policies on capital.
The original decision to raise the tax was part of a broader package of austerity measures. 'At the time, we really had to increase taxes because spending is more rigid... and we ended up having to increase taxes, and they all had to increase, also for reasons of equity and justice,' she recalled, providing context for the difficult choices made during the sovereign debt crisis.
Understand policy impacts on your Portugal property plans at realestate-lisbon.com.
