The Minister of Finance admitted this Tuesday (14 October) that the future synthetic notion of income on which the Government is working “may imply changes to taxation”, but assured that social support currently exempt will continue not to be taxed.
Joaquim Miranda Sarmento was speaking at a joint hearing at the Budget, Finance and Public Administration Committee and the Labor, Social Security and Inclusion Committee, where he was called by the PS to explain the impact of the “synthetic notion of income” subject to IRS on currently exempt social benefits.
The subject gained grounds for parliamentary debate because, in the Government Program, the executive plans to “introduce a synthetic and comprehensive notion of income subject to IRS, which corrects the injustices and undertaxation resulting from the current limiting definition of income subject to IRS, which allows for a greater reduction in marginal rates”.
“The Portuguese tax system is complex and needs simplification. And, as such, we have tried to work on this simplification and this, naturally, will result from studies, reflections and could naturally imply changes to taxation”, he began by admitting.
He then explained that social support will continue on the sidelines. “Are we going to tax non-contributory social benefits? No, we won’t. There will be no taxation of non-contributory social benefits that currently do not pay IRS”he stated, insisting that, “with this Government, they will continue not to pay IRS”.
PS deputy Miguel Costa Matos had asked the minister who will start paying taxes under the new notion.
After Miranda Sarmento guaranteed that the support will continue to be exempt from IRS, the socialist deputy wanted to know specifically if this would happen with all situations that are currently outside of taxation.
Specifically, he asked whether this would happen with compensation for bodily injury, illness or death, with the minister guaranteeing that these “unfortunate” situations will continue not to be taxed. “We are not going to extend IRS taxation to this type of income”, he insisted.
Asked by the PS deputy whether death compensation will be taxed, the minister “We are not going to extend IRS taxation to this type of income”.
The deputy insisted on the topic to find out what will happen to literary or scientific prizes, sports scholarships and compensation given to volunteer firefighters.
“Once again, it is not in the Government’s plans to make changes to the incidence of IRS and, if it did, it is a decision that at the end of the day is up to parliament”, reacted the minister, stating that the executive will not propose to the Assembly of the Republic to propose changes to articles 1 to 12 of the IRS Code, those that concern the incidence of income tax.
Miranda Sarmento explained that the idea of creating the synthetic notion of income, in line with the constitutional idea that the tax is unique, involves taking into account “technological developments”, giving as an example the taxation of gains obtained with cryptoactives, which came into existence with the State Budget law for 2023.