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Comment by munchor | Hacker News Reader

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.

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> 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-anal...

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.

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.

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

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.

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?

Because being reasonable and rational won't take you far in Portugal. Trust me, I'm Portuguese.

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.

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.

But that's essentially a big no-interest loan people are giving to the government no? The money returned at the end of the year is money people could have been investing and earning a return on no? That seems closer to "insane" than "silly." Or am I missing something?

From the other side of the table, that is money the government is investing and earning a return on. If they did it the other way they'd have to raise the tax rates to compensate, which wouldn't go down for the politicians doing it, even if the net result is the same.

>"From the other side of the table, that is money the government is investing and earning a return on."

With the exception of a few notable oil economy countries that have sovereign wealth funds, federal governments most certaily do not invest tax revenue in the market. Taxes are used to finance the running of the country. If governments are lucky something is left over paying its' bills and the government runs a surplus.

Please provide a citation that Portugal invest its' citizen's tax revenues in the financial markets and makes a profit from those.

>"If they did it the other way they'd have to raise the tax rates to compensate, which wouldn't go down for the politicians doing it, even if the net result is the same."

Umm no if they did it the other way around the government could additionally tax people's gains from investments, and people could save for things like their retirement at the same time.

He never said in the market. They do invest in infrastructure tho, which actually helps the taxpayers.

>"He never said in the market."

What "they" said was:

>"that is money the government is investing and earning a return on."

"Investing money and earning a return on it" is universally understood to mean putting your money to work in the financial markets. Your comment is disingenuous at best.

Further governments don't earn a "return" when they spend money on a stoplight or a bridge. Infrastructure requires upkeep, maintenance and eventual replacement.

It's a coast center not a profit center. If it was the latter governments would be building infrastructure like crazy and running a budget surplus. And that clearly isn't the case is it?

Investing money is certainly not universally understood as investing it in financial markets... (Per Oxford dictionary: https://en.oxforddictionaries.com/definition/investment)

You have the right to your opinion, but changing words meaning is taking it a bit far.

Except the phrase was not "investing", it was "investing money and earning a return on it." Maybe you should reread the thread.

In the context of a government or any other large institution this is most certainly understood to mean the financial markets. That is not "opinion" but rather common understanding in English language business parlance.

You have resorted to cherry picking words and trying to play semantic games. You have added exactly nothing to the conversation. In fact it's worse as resorting to "that's just your opinion" type remarks just degrades the level discourse. It's just slightly above name calling.

You are not wrong, except it's not usually a big loan. The witholding rates are chosen so that in most cases what is withheld is close to your final tax bill.

In all countries I know of, tax withholding is not a perfect match to final tax bill, and that could amount to a no-interest loan to government like you say. Not sure if in practice that loan is unusually large in Portugal, could be.

It is sensible. First, deductibles are applied to the bands, like everywhere else. This calculation is done over your yearly salary, in March of the following year. You then pay income tax in August.

However, in order to minimize the amount due in August, the government captures an estimate of your income tax every month (before you get paid).

It is this estimate that is designed to be simple, and applies deductibles to the whole salary. There's no harm: If it happens to capture too much, you'll see your money back next August.

I still don’t understand the benefit over a progressive system.

Under the progressive system, there are no surprises or delays, what I paid that month is exactly what I owe.

Like another poster said, effectively an interest free loan to the government from taxpayers.

What am I missing?

> I still don’t understand the benefit over a progressive system.

Simplicity and personal data protection. In order to capture tax in advance with perfect estimates, employers would need to know your total income and deductible expenses. With the simplistic system, they just need to know how much they're paying you.

Exactly my thoughts... this is complete fake news and complete propaganda from the Government Coalition (all Left Wing).

Health system is completely broken the public Hospitals don't have enough resources or money to threat the patients with dignity, people still live with very low salaries and high prices of goods, The industry is still very weak unlike its mentioned in the article etc.. etc...

Honestly seeing these articles makes me really sad.

>Health system is completely broken

No need to be so dramatic. Compared with countries with a similar economy, our system is objectively very good. Independent reports will back me up.

There are plenty of reasons to be dramatic. The portuguese national health service debt blew up since the current government entered office due to their expenditure captivation push in a stark contrast with the debt reduction push enforced by the austerity program. Consequently some health services fail even to keep skeleton crews of medical teams to remain operational. Medical suppliers are complaining about the goverent's increased payment delays and nurse unions are on months-long strike demanding additional staff to mitigate their overwork problem and also that the current government actually puts to practice the salary increases he announced some months 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.

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

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.

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.

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.

> 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?

> 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

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.

"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.

>cutting social programs

When has that ever happend?

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.

They’re being downvoted because social programs were cut as part of austerity measures in some European states.

"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.

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.

South Europe complaining about high tax is like Americans complaining about expensive petrol.

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.

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.

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.

Probably you got the calculation wrong. And to get 100k in Portugal you probably need to be CEO of a bank or very close. Teachers get max gross 40k a year.

Senior SEO engineering role I was surprised at how much given it was in Portugal.

If you make 100K euros per year in Portugal you will pay more than 50% in taxes.

59% marginal above 80k, UK at that level is 42%.

> this is for a 100,000 euro salary no less.

In Portugal the income tax rate for a €100k gross salary is around 50%.

Then of course there are other forms of taxation, such as a gas tax of over 100%, a rent tax of around 30% and of course a 23% VAT.

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