State Budget 2022 by 10 points. This is what you really need to know (and it’s going to ruin your pocket)

The first budget presented by Fernando Medina recovers the priorities of the socialist executive which ended up failing in Parliament in October and introduces novelties which will directly affect your pocket.

– Scrambled with the IRS: the splitting of two income tax brackets is confirmed, from seven to nine, to increase the income of middle-class families. Tax relief of 150 million euros is estimated. In the IRS, also to support births, the tax deduction of 750 euros is advanced from the second child. The government is also maintaining the extension of IRS Jovem from three to five years. There is no change in the retention tables this year. With the update of the minimum existence, families with incomes up to 9,415 euros are exempt from the IRS. The share of VAT in expenditure on medicines for animals to be slaughtered at the IRS amounts to 35%. Also in the IRS, the government will only move forward in 2023 to include capital gains, but only for securities (on the stock exchange) and for taxpayers in the last stage.

– Lowers fuels: the change in taxes, with a reduction in the FAI equivalent to a reduction in VAT to 13%, will make fuel cheaper. The liter will be 21 cents less for gasoline and 22 cents for diesel. The ISP reduction applies between May and June, but the government admits to extending this period.

– Anti-inflation support in the food basket: to respond to the rise in inflation, the government will grant a subsidy of 60 euros per family to support the food basket, covering 830,000 most needy households. There is also a subsidy of 10 euros per bottle of gas.

– Free childcare and family allowances: the nursery will be free only for children up to the age of one year. The measurement starts this year. From there, it goes up a year at a time. That is, it only applies to new entries. The government also maintains the intention to gradually increase until 2023 child benefits for children up to the age of three, in the first and second levels.

– Extraordinary increase in pensions: advance the extraordinary update of pensions, ten euros, for pensions up to 1,108 euros, benefiting 1.9 million people. The amount is not updated until after the budget comes into effect, but will be retroactive to January.

Responding to the impacts of the war in Ukraine: The measures to respond to the impact of the war in Ukraine will have an impact of 1800 million euros, close to what was spent on the measures against the pandemic. A fund of 50 million euros will be created to support the refugees. As for companies, there will be a subsidy for rising gas costs and credit lines in excess of 400 million euros. Relief from tax and contribution payments is on the list. Anti-inflation measures cost 1,335 million euros. The suspension of the increase in the carbon tax is the one that costs the most: 360 million.

– Business support: the support program for business recovery, in addition to the measures justified by Ukraine, will amount to 2615 million euros. It includes the deduction of IRC collection up to 25% of the investment. The special deposit also ends.

State building: an increase of 1600 million euros is planned for the SNS (700 million) and for the Plan to Relaunch Apprenticeships at School (900 million), supported by the European “bazooka”.

– Political negotiation: the new Minister of Finance, Fernando Medina, admits “a spirit of adaptation” in the face of the impacts of the context of war. However, he says it would be “unusual” to think of presenting an amending budget. Medina is now asking for time to prove herself in her new roles. And he assures: “In no dictionary in the world is it a policy of austerity”.

– Macroeconomic scenario: The government estimates a 4.9% increase in GDP, which represents a slowdown in the economy. The deficit should shrink to 1.9% of GDP, below the level required by Brussels (but which is not applied due to the pandemic). Finally, a contraction in public debt is expected, to 120.7% of GDP. The inflation rate climbs to 4%.

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