Tax Cuts? Who are the winners and losers?

Source : Diário de Notícias 7/11/2007

Forty thousand+ Madeirans (and resident foreigners hopefully) are going to pay less tax in 2008.

The budgets for 2008, that are due to be presented in the Regional Assembly in December, should bring a little extra christmas cheers for those on the lower tax bands.

If all goes to plan, those on the minimum wage (earnings up to €4,639 per annum) will see the starter rate of taxation reduce from 8.5% to 8%, and in the second band (€4,639 to €7,017), there will be a reduction from 11% to 10.5%. These represent tax differentials of 24% and 19% respectively, compared to our mainland taxpaying equivalents, and will introduce in some cases lower liabilities than even the Azores, who up until now have enjoyed the lowest rates of taxation in these two tax bands.

These reductions will directly benefit around 44,000 low earners on Madeira, but it is not clear whether this will spill into higher earning groups as the tax band adjustment figures are not mentioned.

Also, companies that have headquarters on Madeira who currently pay the 25% rate, may see that drop to 20%, if the proposals are approved.

Well I am not going to throw a party for this, but it’s slightly good news for those who are struggling to pay the increased mortgage burdens due to rising euro interest rates, and higher shopping bills (has anyone else noticed?). On the other hand, as Madeira itself is struggling to deal with its own budgets, as are the municipalities, its a rather surprising announcement, and we can expect to see severe cutbacks in council expenture as a result. In particular it is rumoured that outside of Funchal a maximum of six workmen will be allowed to stand around a hole watching another one dig (the official maximum was 7 in 2007, down from 9 in 2006) and unless that hole can be proved to generate more revenue or at least be self financing, it will need to be filled in within six months of completion (9 months in 2007). Also road maintainance budgets outside of Funchal are rumoured to be a target for cutbacks, and resurfacing is likely to be rescheduled for for every 400 years (300 years in 2007).

The good news is that Funchal will be totally unaffected by such cuts, which will be targeted to hit those non-touristy places especially hard. For example Ribena com Água, will only be permitted one low energy light bulb for its street christmas decorations (2 x 60w permitted in 2007, although it was rumoured that 2 tealights were also illegally in use), and it is expected that the PSD (Madeira’s leading political party) will try and set an example by introducing leglislation to cut back to 4 million inaugarations in 2008, and most noticably inaugarations for new lamposts will be permanently cancelled, being replaced by simple street parties and nacional holidays instead. Tough times ahead?

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