The relief in the withholding of the IRS (personal income tax) was recently presented by the Portuguese government as a benefit, because it allows families to have more disposable income at the end of the month. The Portuguese Large Families Association (APFN) considers this measure demagogic and misleading, in addition to translating several perversions that effectively harm Portuguese families.
For APFN this measure is demagogic and misleading because in fact the tax is not reduced, only the withholding is reduced. Furthermore, it is a mere cosmetic operation as, with changes in tax rates, families may end up paying more tax in the end. Withholding less input tax has nothing to do with what is charged downstream, due to the application of the new tax rates.
The change to the withholding table only prevents, in a misleading way, that the family realizes that a monthly increase in the gross salary may lead to an effective reduction in the monthly net salary that the family takes home, despite the existence of 3 or more children. This is because every extra euro of salary that comes in is taxed in exactly the same way, regardless of the number of people that euro will support.
The final amount of tax is not changed
If it is true that with this change families can have more disposable income at the end of each month, it is also true that the final amount of tax is not changed, so the amount they have now will have less in the IRS refund, or instead of refund they may have to pay.
The measure also reflects perversions that effectively harm families instead of benefiting them, starting with the institution of withholding tax which, in the overwhelming majority of cases, means, on the part of the State, an extra charge to later return without interest what never should have charged the families.
The APFN reiterates that the current tax model effectively harms families with children, defending as fair the tax model that considers the number of people living on disposable income, correcting the progressivity of the tax. The current model, based on monthly discounts with maximum ceilings, forgets the basic reality: how many people live off the income that goes into a house, all citizens of equal value, who deserve the same attention and respect from the State.
The APFN has already informed the Portuguese Government and Parliament of its position on the announced measure, asking for a change in the tax model itself, which has led to the financial asphyxiation of families, especially the larger ones.