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As a Portuguese person living in Portugal, this article is quite misleading. Portugal is one of the countries with highest income and social security taxes in E

As a Portuguese person living in Portugal, this article is quite misleading. Portugal is one of the countries with highest income and social security taxes in Europe (not to mention VAT and other types of taxation). The economy is growing, yes, mainly thanks to tourism. However, austerity is still much in place and taxes have only gone up since 2008 for middle and higher class (for low class people the conditions are much better of course). In order for a country to have a "revival", it needs to be growing in multiple industries but Portugal is evermore dependent on tourism which doesn't scale that well. Entrepreneurship is very limited to due to insane levels of bureucracy, high taxes, difficulty in firing people and most talent leaving to the UK/Germany/Switzerland in search of better salaries and better "value for money" taxation.

afterburner 8y ago
Austerity doesn't mean high taxes. Austerity means cutting social programs and public investment.
- whoisnnamdi 8y ago
  This is incorrect. Austerity can involve tax increases, spending cuts, or combinations of the two. It’s not limited simply to spending cuts. That said, it very much matters what “kind” of austerity one engages in, as research indicates that tax increases and spending cuts have different respective effects on an economy.
  - TheOtherHobbes 8y ago
    Like most economic principles, there’s a big gap between theory and practice. In reality Austerity is defined by tax breaks for the very rich, combined with spending cuts and privatisation - i.e. economic enclosure, debt peonage, and asset sweating - for everyone else. Sometimes that includes tax increases, but if som it usually means indirect taxation. Austerity is purely ideological. Even the IMF acknowledges that recent Austerity regimes have underperformed expectations while examples of stimulus spending have had the opposite effect.
    - zozbot123 8y ago
      What do you mean by "the very rich"? Rich by income, assets or consumption? Currently, lots of governments overtax income and sometimes assets, while undertaxing consumption. They tax the likes of Bill Gates and Warren Buffett a lot (right up until the point when they-- or perhaps their descendents-- actively donate their assets to some charitable trust or another) while leaving the crazy luxury spending of Larry Ellison and others like him largely untaxed! This is crazy, and is what a move to consumption taxes (what you call "indirect taxes" in your parent comment) helps fix.
    - geezerjay 8y ago
      > In reality Austerity is defined by tax breaks for the very rich, combined with spending cuts and privatisation This is objectively false, and a poor atempt at forcing a particular spin on a very objective definition. Looking at Portugal, the bailout program enforced tax increases exclusively on the middle and upper class, along with publix sector workers who are by far more priviledged than private sector workers. For example, the bailout program saw the introduction of a new tax bracket for the richest taxpayers which forced a 53% income tax rate. And also privatizations are implemented to avoid additional austerity pushes by providing the government with one-off sources of free cash thus avoiding further spending cuts or tax increases. Therefore, they are in fact an alternative to austerity, not a consequence. > Austerity is purely ideological. This statement is so mind-numbingly wrong that it boggles the mind how anyone in this point in time could be so disingenuous or clueless to keep parroting this silliness. Let's look at Portugal, who doubled its sovereign debt fron 60% of the nation's GDP to over 120% in about 5 years prior to any mention of austerity, and did so by piling a string of yearly deficits of over 10% including a structural deficit of around 3%. If your state is so dependent on overspending that it needs loans after loans to keep working and pay up salaries, who in their right mind will argue that they don't desperately need to cut spending and/or raise taxes to avoid going bankrupt or even to keep functioning? If austerity was actually "purely ideological", how exactly would it be possible for Portugal to keep their 10% spending deficits?
- Nokinside 8y ago
  > Austerity is a political-economic term referring to policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both. https://en.wikipedia.org/wiki/Austerity https://en.wikipedia.org/wiki/Austerity Those who favor austerity will say that the austerity laid groundwork for Portugal's success, those who have opposing view say that it only helped.
  - dmix 8y ago
    "Austerity" can take many forms too. It's not something you should support as a black/white thing. There's a ton of context involved, including why the state needs austerity and also what long term goals are involved. As far as I'm concerned if a government spent and loaned recklessly for decades and the only solution is to make temporary cuts so the government can go right back to spending (ie, no long term changes to government culture, risk management, and fiscal responsibility were made) then while it's still "austerity", it's not necessarily a very useful one. Additionally, despite all of the FUD about "austerity" measures the average nation state across the entire western world (and in Asia too, minus Singapore) have exploded in size over the last few decades. Most of these "austerity" programs are a tiny, temporary, sliver relative to the massive growth in scale of the administrative state.
- Anka33 8y ago
  >cutting social programs When has that ever happend?
  - ralusek 8y ago
    You're down voted, but this is no joke. Social programs are very often hyper-pragmatic, overly specific bandaids that effectively pile on each other indefinitely. Cutting social programs essentially only reliably occurs at bankruptcy or collapse, it will almost never occur as the result of the democratic process. People do not run successful campaigns on the basis of displacing hundreds of San Francisco families, for example, regardless of whether or not those families are rightfully entitled to their housing or not. Once people have come to rely on something, it will upend their livelihood to remove it, and that is not something most people are comfortable voting for. If you've ever worked in a government job, you can compare the state of the bureaucracy now to previous versions of the texts, and see that they only ever grow and compound on themselves.
    - nfg 8y ago
      They’re being downvoted because social programs were cut as part of austerity measures in some European states.
- dmix 8y ago
  "Social programs and public investment" are hardly the only things a government can cut. This is just a heavily biased counter-narrative used to protest against them. They may be the low hanging fruit given the entrenched interests which protect corporate welfare projects, tax breaks to "friends" of government, defence spending, foreign aid, the countless non-social agencies within government, etc, etc, etc. Nor can you point to some half-hearted "austerity" where there was no change in the gov culture which brought about the unsustainable spending, nor factoring in the complete scale on which the previous government spent recklessly for which austerity is required in some countries vs others (and size of GDP, dependency on public investment/social programs, etc). Even HN isn't immune to political flamewars.
- jayalpha 8y ago
  This will get me down-voted. But anyway: I believe the welfare state can be a good thing. Some social network that gets you back on your feed. On the other hand, Portugal has very little welfare and government hand-outs. Because of this, Portugal has one of the lowest migration of Muslim "refugees". I prefer people who bring value as an immigrant to a country. The father of the guy who made the Strasbourg terrorists attack has been living on 5400 Euros a month welfare payments. I don't need this. https://ns2017.wordpress.com/2018/12/22/5400-euros-dallocations-mensuelles-pour-le-pere-du-tueur-de-strasbourg/ https://ns2017.wordpress.com/2018/12/22/5400-euros-dallocati...
  - andrepd 8y ago
    It will get you downvoted, but not for the reasons to believe (psa: starting a post with "poor me, I the martyr know I will get downvoted for this" is frowned upon). It's not a very good argument, to defend a reduction of welfare payments to discourage immigrants from coming. Immigrants are much more attracted to high salaries (which implies obviously that they want to work) than by high welfare payments. Secondly, the example you give is typical of news coverage about terrorism. Flooding the news with stories about the attack and the perpetrator, with which you can gain exactly 0 useful information since it's essentially an anecdote. You're much more wise to look at large-scale data than single events, examined to exhaustion. Even beside all that, you're clearly trying desperately to shoehorn your anti-immigration opinions into a discussion about an unrelated topic. That, also, is frowned upon.
    - jayalpha 8y ago
      "Secondly, the example you give is typical of news coverage about terrorism. Flooding the news with stories about the attack and the perpetrator, with which you can gain exactly useful information since it's essentially an anecdote." Point taken: https://uebermedien.de/11488/kartenlegen-mit-kriminellen-auslaendern/ https://uebermedien.de/11488/kartenlegen-mit-kriminellen-aus... Direct link to the map: https://i.imgur.com/lBvUjTM.png https://i.imgur.com/lBvUjTM.png "It's not a very good argument, to defend a reduction of welfare payments to discourage immigrants from coming." I can't think of a better one. Or to speak with Milton Friedman: You can have open borders or you can have a welfare state. You can not have both. May I assume you are against a welfare state? "Immigrants are much more attracted to high salaries (which implies obviously that they want to work)" Most immigrants that I am talking about can hardly read in their own language. I can track down the statistic for you. " than by high welfare payments." Have you ever heard the word "welfare shopping"? They chose the country in Europe with the biggest payouts. "Even beside all that, you're clearly trying desperately to shoehorn your anti-immigration opinions into a discussion about an unrelated topic." I don't like that you give the impression I am against immigration. I am an immigrant myself and countries SHOULD attract immigrants. But it is a serious point of consideration that Portugal seems to avoid a specific kind of immigrant.
galfarragem 8y ago
Also as a Portuguese I consider this article literally fake news/propaganda.
- danpeddle 8y ago
  Portugal still has the crazy tax system where deductions are applied over the whole salary, not the bands? That was one thing that never made any sense to me - effectively removing motivations for salary increases, as you could end up with less even with a raise.
  - hn_throwaway_99 8y ago
    Wait, what? Are you saying that the top rate in their graduated income tax system is applied to someone's entire income, not just the amount above the lower cutoff point for the highest band? If so, that seems literally insane to me. Why wouldn't Portugal fix this?
    - jdmoreira 8y ago
      Because being reasonable and rational won't take you far in Portugal. Trust me, I'm Portuguese.
    - pepelegal 8y ago
      An approximation of the taxes are deducted from the monthly pay, and the adjustment to the final tax is done annually, taking in account all deductions. Yearly final taxes are not applied to the entire income, only to the amount in the band as you mentioned. The approximate monthly taxes are applied to the whole monthly income.
  - fddr 8y ago
    It is not quite that bad. Tax withholding rates are not marginal, they do apply to the whole salary. But the actual tax rates at the end of the year are marginal. So it is possible a pay raise means you get less money after witholding on a monthly basis, but on an yearly basis, after taxes paid/refunded, a pay raise is always net positive. Still silly, but not insane.
walshemj 8y ago
I looked at a job in Portugal an the taxes where less than the UK - this is for a 100,000 euro salary no less.
- varjag 8y ago
  South Europe complaining about high tax is like Americans complaining about expensive petrol.
  - icebraining 8y ago
    That's only really true for income taxes; we're in the top 10 for VAT, way above average for gas taxes, high energy taxes, etc. If you look at the net personal average tax rate, we're close to Norway, Luxembourg and France, except when you live with less than €10k/year, every marginal euro taken for taxes hurts quite a bit more.
    - varjag 8y ago
      When one starts to lump unrelated taxes atop of income tax, it's a sure sign it's not that dramatic. VAT in Norway is 25%, petrol yesterday was €1.6/L (and we're a major oil producing nation). A car here is probably 1.8x of same model sold in Portugal, purely due to the taxes. About 35% of my (unremarkable) paycheck effectively goes towards income tax, after all tax breaks are factored in. If you are in top tax bracket, you'd be easily paying 45% effective income tax, with nominal over 50%. Do we get fair return for the money? Most people here seem to think so. Can smaller tax on over smaller base income be felt disproportionately? You have a point there. However Portugal is a first world nation, and this level of civics, infrastructure, education and healthcare does require substantial money for upkeep. There is no good way around this, but hopefully you get a better deal on that due to economies of scale than if you had to provide all that for yourself on your own.
      - icebraining 8y ago
        You seem to be confusing me with someone who wants low taxes. I do not. I just disagree that we already have low taxes, as you implied with your comparison. Norway is an outlier even among rich countries. Having lower taxes than Norway does not mean taxes are low.
andrepd 8y ago
The part about balancing the budget is true, though. We have the lowest deficit in many years and (supposedly) on track to surplus in 2020. This is undeniably good news for long-term sustainability.
sergiosgc 8y ago
> Portugal is one of the countries with highest income and social security taxes in Europe (not to mention VAT and other types of taxation). This is objectively false. Portugal ranks about middle in total taxation, against the rest of the EU. Taxes are about 34% of GDP, which is pretty average in Europe. You have all the data here, with the most interesting summary in the "Tax Main Aggregates" document: https://ec.europa.eu/taxation_customs/business/economic-analysis-taxation/data-taxation_en https://ec.europa.eu/taxation_customs/business/economic-anal...
- PedroBatista 8y ago
  Numbers are a beautiful thing, but in this case if we attach meaning to numbers, things like salary and disposable income start to pop-up. We pay middle but earn way less than middle, meaning cost of goods and services are pretty much the same within some margin, but income is a order of magnitude off.
  - sergiosgc 8y ago
    Self-pity is a national sport, but unwarranted in this case: The country provides free health services, with quality levels that are worldwide references. Everyone has access to free high school education and next to free university access. You can earn a medical degree for less than 10k€ in school fees. Police, although understaffed, are effective, resulting in top world ranks in citizen security. The only real black spot, in State services is justice. It works, but is slow as molasses. All of these services must be paid. You draw a correlation between GDP, disposable income, and taxation level that is erroneous. The link is between State service level and taxation level. In Portugal these look OK.

afterburner 8y ago

Austerity doesn't mean high taxes. Austerity means cutting social programs and public investment.

whoisnnamdi 8y ago
This is incorrect. Austerity can involve tax increases, spending cuts, or combinations of the two. It’s not limited simply to spending cuts. That said, it very much matters what “kind” of austerity one engages in, as research indicates that tax increases and spending cuts have different respective effects on an economy.
- TheOtherHobbes 8y ago
  Like most economic principles, there’s a big gap between theory and practice. In reality Austerity is defined by tax breaks for the very rich, combined with spending cuts and privatisation - i.e. economic enclosure, debt peonage, and asset sweating - for everyone else. Sometimes that includes tax increases, but if som it usually means indirect taxation. Austerity is purely ideological. Even the IMF acknowledges that recent Austerity regimes have underperformed expectations while examples of stimulus spending have had the opposite effect.
  - zozbot123 8y ago
    What do you mean by "the very rich"? Rich by income, assets or consumption? Currently, lots of governments overtax income and sometimes assets, while undertaxing consumption. They tax the likes of Bill Gates and Warren Buffett a lot (right up until the point when they-- or perhaps their descendents-- actively donate their assets to some charitable trust or another) while leaving the crazy luxury spending of Larry Ellison and others like him largely untaxed! This is crazy, and is what a move to consumption taxes (what you call "indirect taxes" in your parent comment) helps fix.
  - geezerjay 8y ago
    > In reality Austerity is defined by tax breaks for the very rich, combined with spending cuts and privatisation This is objectively false, and a poor atempt at forcing a particular spin on a very objective definition. Looking at Portugal, the bailout program enforced tax increases exclusively on the middle and upper class, along with publix sector workers who are by far more priviledged than private sector workers. For example, the bailout program saw the introduction of a new tax bracket for the richest taxpayers which forced a 53% income tax rate. And also privatizations are implemented to avoid additional austerity pushes by providing the government with one-off sources of free cash thus avoiding further spending cuts or tax increases. Therefore, they are in fact an alternative to austerity, not a consequence. > Austerity is purely ideological. This statement is so mind-numbingly wrong that it boggles the mind how anyone in this point in time could be so disingenuous or clueless to keep parroting this silliness. Let's look at Portugal, who doubled its sovereign debt fron 60% of the nation's GDP to over 120% in about 5 years prior to any mention of austerity, and did so by piling a string of yearly deficits of over 10% including a structural deficit of around 3%. If your state is so dependent on overspending that it needs loans after loans to keep working and pay up salaries, who in their right mind will argue that they don't desperately need to cut spending and/or raise taxes to avoid going bankrupt or even to keep functioning? If austerity was actually "purely ideological", how exactly would it be possible for Portugal to keep their 10% spending deficits?
Nokinside 8y ago
> Austerity is a political-economic term referring to policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both. https://en.wikipedia.org/wiki/Austerity https://en.wikipedia.org/wiki/Austerity Those who favor austerity will say that the austerity laid groundwork for Portugal's success, those who have opposing view say that it only helped.
- dmix 8y ago
  "Austerity" can take many forms too. It's not something you should support as a black/white thing. There's a ton of context involved, including why the state needs austerity and also what long term goals are involved. As far as I'm concerned if a government spent and loaned recklessly for decades and the only solution is to make temporary cuts so the government can go right back to spending (ie, no long term changes to government culture, risk management, and fiscal responsibility were made) then while it's still "austerity", it's not necessarily a very useful one. Additionally, despite all of the FUD about "austerity" measures the average nation state across the entire western world (and in Asia too, minus Singapore) have exploded in size over the last few decades. Most of these "austerity" programs are a tiny, temporary, sliver relative to the massive growth in scale of the administrative state.
Anka33 8y ago
>cutting social programs When has that ever happend?
- ralusek 8y ago
  You're down voted, but this is no joke. Social programs are very often hyper-pragmatic, overly specific bandaids that effectively pile on each other indefinitely. Cutting social programs essentially only reliably occurs at bankruptcy or collapse, it will almost never occur as the result of the democratic process. People do not run successful campaigns on the basis of displacing hundreds of San Francisco families, for example, regardless of whether or not those families are rightfully entitled to their housing or not. Once people have come to rely on something, it will upend their livelihood to remove it, and that is not something most people are comfortable voting for. If you've ever worked in a government job, you can compare the state of the bureaucracy now to previous versions of the texts, and see that they only ever grow and compound on themselves.
  - nfg 8y ago
    They’re being downvoted because social programs were cut as part of austerity measures in some European states.
dmix 8y ago
"Social programs and public investment" are hardly the only things a government can cut. This is just a heavily biased counter-narrative used to protest against them. They may be the low hanging fruit given the entrenched interests which protect corporate welfare projects, tax breaks to "friends" of government, defence spending, foreign aid, the countless non-social agencies within government, etc, etc, etc. Nor can you point to some half-hearted "austerity" where there was no change in the gov culture which brought about the unsustainable spending, nor factoring in the complete scale on which the previous government spent recklessly for which austerity is required in some countries vs others (and size of GDP, dependency on public investment/social programs, etc). Even HN isn't immune to political flamewars.
jayalpha 8y ago
This will get me down-voted. But anyway: I believe the welfare state can be a good thing. Some social network that gets you back on your feed. On the other hand, Portugal has very little welfare and government hand-outs. Because of this, Portugal has one of the lowest migration of Muslim "refugees". I prefer people who bring value as an immigrant to a country. The father of the guy who made the Strasbourg terrorists attack has been living on 5400 Euros a month welfare payments. I don't need this. https://ns2017.wordpress.com/2018/12/22/5400-euros-dallocations-mensuelles-pour-le-pere-du-tueur-de-strasbourg/ https://ns2017.wordpress.com/2018/12/22/5400-euros-dallocati...
- andrepd 8y ago
  It will get you downvoted, but not for the reasons to believe (psa: starting a post with "poor me, I the martyr know I will get downvoted for this" is frowned upon). It's not a very good argument, to defend a reduction of welfare payments to discourage immigrants from coming. Immigrants are much more attracted to high salaries (which implies obviously that they want to work) than by high welfare payments. Secondly, the example you give is typical of news coverage about terrorism. Flooding the news with stories about the attack and the perpetrator, with which you can gain exactly 0 useful information since it's essentially an anecdote. You're much more wise to look at large-scale data than single events, examined to exhaustion. Even beside all that, you're clearly trying desperately to shoehorn your anti-immigration opinions into a discussion about an unrelated topic. That, also, is frowned upon.
  - jayalpha 8y ago
    "Secondly, the example you give is typical of news coverage about terrorism. Flooding the news with stories about the attack and the perpetrator, with which you can gain exactly useful information since it's essentially an anecdote." Point taken: https://uebermedien.de/11488/kartenlegen-mit-kriminellen-auslaendern/ https://uebermedien.de/11488/kartenlegen-mit-kriminellen-aus... Direct link to the map: https://i.imgur.com/lBvUjTM.png https://i.imgur.com/lBvUjTM.png "It's not a very good argument, to defend a reduction of welfare payments to discourage immigrants from coming." I can't think of a better one. Or to speak with Milton Friedman: You can have open borders or you can have a welfare state. You can not have both. May I assume you are against a welfare state? "Immigrants are much more attracted to high salaries (which implies obviously that they want to work)" Most immigrants that I am talking about can hardly read in their own language. I can track down the statistic for you. " than by high welfare payments." Have you ever heard the word "welfare shopping"? They chose the country in Europe with the biggest payouts. "Even beside all that, you're clearly trying desperately to shoehorn your anti-immigration opinions into a discussion about an unrelated topic." I don't like that you give the impression I am against immigration. I am an immigrant myself and countries SHOULD attract immigrants. But it is a serious point of consideration that Portugal seems to avoid a specific kind of immigrant.

galfarragem 8y ago

Also as a Portuguese I consider this article literally fake news/propaganda.

danpeddle 8y ago
Portugal still has the crazy tax system where deductions are applied over the whole salary, not the bands? That was one thing that never made any sense to me - effectively removing motivations for salary increases, as you could end up with less even with a raise.
- hn_throwaway_99 8y ago
  Wait, what? Are you saying that the top rate in their graduated income tax system is applied to someone's entire income, not just the amount above the lower cutoff point for the highest band? If so, that seems literally insane to me. Why wouldn't Portugal fix this?
  - jdmoreira 8y ago
    Because being reasonable and rational won't take you far in Portugal. Trust me, I'm Portuguese.
  - pepelegal 8y ago
    An approximation of the taxes are deducted from the monthly pay, and the adjustment to the final tax is done annually, taking in account all deductions. Yearly final taxes are not applied to the entire income, only to the amount in the band as you mentioned. The approximate monthly taxes are applied to the whole monthly income.
- fddr 8y ago
  It is not quite that bad. Tax withholding rates are not marginal, they do apply to the whole salary. But the actual tax rates at the end of the year are marginal. So it is possible a pay raise means you get less money after witholding on a monthly basis, but on an yearly basis, after taxes paid/refunded, a pay raise is always net positive. Still silly, but not insane.

walshemj 8y ago

I looked at a job in Portugal an the taxes where less than the UK - this is for a 100,000 euro salary no less.

varjag 8y ago
South Europe complaining about high tax is like Americans complaining about expensive petrol.
- icebraining 8y ago
  That's only really true for income taxes; we're in the top 10 for VAT, way above average for gas taxes, high energy taxes, etc. If you look at the net personal average tax rate, we're close to Norway, Luxembourg and France, except when you live with less than €10k/year, every marginal euro taken for taxes hurts quite a bit more.
  - varjag 8y ago
    When one starts to lump unrelated taxes atop of income tax, it's a sure sign it's not that dramatic. VAT in Norway is 25%, petrol yesterday was €1.6/L (and we're a major oil producing nation). A car here is probably 1.8x of same model sold in Portugal, purely due to the taxes. About 35% of my (unremarkable) paycheck effectively goes towards income tax, after all tax breaks are factored in. If you are in top tax bracket, you'd be easily paying 45% effective income tax, with nominal over 50%. Do we get fair return for the money? Most people here seem to think so. Can smaller tax on over smaller base income be felt disproportionately? You have a point there. However Portugal is a first world nation, and this level of civics, infrastructure, education and healthcare does require substantial money for upkeep. There is no good way around this, but hopefully you get a better deal on that due to economies of scale than if you had to provide all that for yourself on your own.
    - icebraining 8y ago
      You seem to be confusing me with someone who wants low taxes. I do not. I just disagree that we already have low taxes, as you implied with your comparison. Norway is an outlier even among rich countries. Having lower taxes than Norway does not mean taxes are low.

andrepd 8y ago

The part about balancing the budget is true, though. We have the lowest deficit in many years and (supposedly) on track to surplus in 2020. This is undeniably good news for long-term sustainability.

sergiosgc 8y ago

> Portugal is one of the countries with highest income and social security taxes in Europe (not to mention VAT and other types of taxation). This is objectively false. Portugal ranks about middle in total taxation, against the rest of the EU. Taxes are about 34% of GDP, which is pretty average in Europe. You have all the data here, with the most interesting summary in the "Tax Main Aggregates" document: https://ec.europa.eu/taxation_customs/business/economic-analysis-taxation/data-taxation_en https://ec.europa.eu/taxation_customs/business/economic-anal...

PedroBatista 8y ago
Numbers are a beautiful thing, but in this case if we attach meaning to numbers, things like salary and disposable income start to pop-up. We pay middle but earn way less than middle, meaning cost of goods and services are pretty much the same within some margin, but income is a order of magnitude off.
- sergiosgc 8y ago
  Self-pity is a national sport, but unwarranted in this case: The country provides free health services, with quality levels that are worldwide references. Everyone has access to free high school education and next to free university access. You can earn a medical degree for less than 10k€ in school fees. Police, although understaffed, are effective, resulting in top world ranks in citizen security. The only real black spot, in State services is justice. It works, but is slow as molasses. All of these services must be paid. You draw a correlation between GDP, disposable income, and taxation level that is erroneous. The link is between State service level and taxation level. In Portugal these look OK.