Portuguese president sends tax rises to Constitutional Court

LISBON Tue Jan 1, 2013 4:52pm EST

Portugal's President Anibal Cavaco Silva speaks to supporters during his last electoral rally in Lisbon January 21, 2011. REUTERS/Jose Manuel Ribeiro

Portugal's President Anibal Cavaco Silva speaks to supporters during his last electoral rally in Lisbon January 21, 2011.

Credit: Reuters/Jose Manuel Ribeiro

LISBON (Reuters) - Portugal's president has asked the Constitutional Court to rule on whether massive tax hikes included in the 2013 budget are fairly distributed and legal, he said on Tuesday after signing the budget into law.

The decision is a setback for the center-right government, which has argued that the largest tax hikes in living memory are the only way to ensure debt-ridden Portugal meets the tough terms of an international bailout.

"On my initiative, the Constitutional Court will be called on to decide on the conformity of the 2013 state budget with the constitution of the republic," President Anibal Cavaco Silva said in his New Year's Day address to the nation.

Cavaco Silva said the budget would affect some people more than others, "which raises justified doubts over the distribution of the sacrifices".

Last year, the court blew a hole in the government's financial plans last year when it ruled against a measure to cut holiday bonus payments to civil servants, forcing the government to find alternative sources of revenue.

That decision took several months, but it was not retrospective and applied only to the following fiscal year.

Portugal struggled last year to raise enough tax revenues because of its deepest recession since the 1970s, prompting its creditors, the European Union and IMF, to relax budget goals.

The tough 2013 budget, which foresees a third year of recession, has prompted a series of protests in the past few months by citizens growing increasingly angry at austerity.

The opposition Socialists had already questioned the validity of the tax hikes and promised to send them to the Constitutional Court if the president did not.

(Reporting by Axel Bugge; Editing by Kevin Liffey)

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