More than 187,000 civil servants, who receive up to EUR 870 gross per month, risk losing the new interim salary increase of 1% to EUR 12 per month if the IRS tables are not revised to accommodate this increase, according to DN / Dinheiro Vivo Accounts. At today’s meeting with the Secretary of State for the Presidency, Inês Ramires, the three unions representing civil servants (Frente Comum, Fesap and STE) will raise the issue.
However, Finance Minister Fernando Medina already assured that the government is “working on a solution so that this increase does not translate into a decrease in net income through deductions at source,” he said at the briefing of the Council of Ministers last week who approved the new salary increase in the state. Speaking to DN/Dinheiro Vivo, the Ministry of Finance said only that “the government is working on the revision of the withholding tables, to ensure that the increase in gross income translates into an increase in net income, making the necessary adjustments be done”, without giving further details.
This is the second change to the IRS tables in three months. In January 2023, after the entry into force of the salary increases in the government, from 52.11 euros for gross wages to 2612.03 euros or 2% for higher salaries, Finance had to make an initial adjustment to prevent the increase from being absorbed by the tax .
The additional 1% for all government employees raises the issue again, as current withholding tax rates could lead to net losses of up to €12 for the lowest wage earners, up to about €870 gross per month, which will affect more than 187,000 workers. employees, a quarter of the total universe of 742,260 employees.
DN/Dinheiro Vivo performed simulations for two types of situations, both for a single dependent worker without children, and without taking into account social security contributions, of 11%. For example, those who receive the minimum wage in the state, of 761.58 euros, do not have to pay taxes, because the ceiling of 0% withholding tax rises to 762 euros. The employee only needs to deduct from this value. With the additional increase of 1%, the basic salary will increase by a further EUR 7.62 to EUR 769.2 upon commencement of employment, which means that withholding tax will amount to 2%. Apart from this amount, the employee will have a monthly income of EUR 753.82, which is EUR 7.76 less than he earned. That is, the additional increase was accommodated by the current IRS tables. In order for these employees to experience an effective increase in their net monthly income, it will therefore be necessary to increase the maximum tax exemption from EUR 762 to EUR 770: that is eight EUR more.
For a technical assistant in the general career of the seventh salary step, i.e. who earns EUR 861.23 gross monthly, the withholding tax is currently 7% or EUR 60.29, giving a net income of EUR 800.94 . The additional 1% increase increases the gross salary by EUR 8.6, from EUR 861.23 to EUR 869.84, but also pushes this income towards the higher withholding tax (9.3%), as the ceiling for the reduction of 7% is at 863 euros. After all, the net wage decreases by EUR 11.94 to EUR 789 compared to the current wage. Once again, the tax canceled out the effect of the extraordinary salary increase and even caused a loss of net income. To guarantee fiscal neutrality, as defended by Fernando Medina, it would then be necessary to extend the fourth bracket, with a deduction of 7%, from, for example, 863 euros to 870 euros.
Overall, the government will need to amend the first five tiers of withholding tax, which cover gross monthly salaries of up to €964, to ensure that the new 1% salary increase is effectively reflected in civil servants’ pockets. The procedure was identical to that of last January. At that point, the guardianship changed tables between the second and fifth echelons, easing the tax burden and expanding the covered income ranges, to avoid diluting increases in tax.
The second version of the IRS tables is not effective until June 30. From the second semester, July 1, the tax authorities will apply a new model, according to a marginal rate logic, in line with the levels taken into account for the annual tax settlement, which will lead to a reduction in the withholding. Nevertheless, this new regime maintains the exemption ceiling at 762 euros, meaning that the fine of 7.76 euros remains for civil servants who now receive 769.2 euros, the new minimum wage in the state. In the case of the technical assistant with a salary that rises to 869.84 euros, the discount even drops from the current 7% (60.29 euros) to 6.7% (58.28 euros), so that the net income 811.52 euros will be, about 11 euros more than the current payroll.
The new 1% salary increase will be applied from April and will cost 195 million euros according to the government, but in today’s meeting the union structures are demanding retroactive effect to 1 January.
Source: DN
