IRS: Ministry of Finance finds it inappropriate to abide by the Ombudsman’s recommendation on taxation of income from previous years

The Ministry of Finance considers that "it is not currently timely to introduce an amendment to article 74 of the IRS Code".

The reply sent to this organ of the State by the Secretary of State for Finance, António Mendonça Mendes, stems from the legislative recommendation addressed by the Ombudsman to the Minister of Finance at the beginning of October 2018.

In the opinion of the Ombudsman, Maria Lúcia Amaral, the current regime continues to produce situations of profound and incomprehensible fiscal injustice, particularly in the case of taxpayers who, through no fault of their own, face years of delay in payments of salaries, pensions and pensions and are then twice penalized by aggravated taxation and even loss of social benefits.

Already in 2008, the Ombudsman had addressed a first recommendation that was never adhered to in the intended terms. The changes introduced by successive governments have only mitigated the adverse effects of the regime, which currently affects past income and the current tax rate at the time of taxation.

For example, a pensioner whose low income guaranteed that he would never be subject to IRS and who has lived for years with an income inferior to that due to an error of calculation of his benefit, may have to pay tax in the At the Ombudsman’s office, 90 complaints were filed in the Ombudsman’s Office in 2005, 23 of which in the last two years.

The Ombudsman recalls that until 2001, and in a less advanced technological context, the actual earnings of taxable persons were taxed according to the rate applicable in the years to which they reported, resulting in an adequate, fair and neutral tax solution.

Maria Lúcia Amaral also recalls, with regard to Judgment No. 306/2010 of the Constitutional Court on this provision, that situations of injustice (for which the Ombudsman is responsible) are not necessarily unconstitutional.

"I continue to understand that there are sufficient grounds for altering the current normative solution and for seeking to formulate a more just and more adequate solution than that resulting from the current wording of article 74 of the IRS Code "Says the Ombudsman.