September 15, 2016 / 1:56 PM / a year ago

Portugal to launch property tax on rich in 2017 budget -lawmaker

LISBON, Sept 15 (Reuters) - Portugal’s government plans to introduce an extra tax on large property holdings in next year’s budget, which real estate investment funds would also have to pay, a lawmaker said on Thursday.

The minority Socialist government and its Communist and Left Bloc allies in parliament have been discussing such a tax for several months. The centre-right opposition believes it could undermine investment in a sector that has attracted many foreigners in recent years.

Left Bloc legislator Mariana Mortagua said the tax would be levied progressively on the value of property holdings starting somewhere between 500,000 euros ($560,000) and 1 million euros. She did not say what the tax rates would be.

“This is not a tax on middle-class families, nor upper-middle class families,” she said. “The economic point of this tax is to reach the big property fortunes.”

The government is expected to present the budget, in which it has promised to continue cutting the deficit in line with its European Union commitments, by the middle of next month.

Portugal already levies a municipal housing tax on all property at up to 0.8 percent of the value.

The new tax would be levied on property funds but not on buildings housing economic activities such as factories, Mortagua said.

Eurico Brilhante Dias, a Socialist member of parliament, said Portugal had many taxpayers who declared low incomes from work but owned lots of property.

The new tax “would create more tax equality in Portugal to, for example, finance a reduction in direct taxes on income and eliminate the surcharge on income tax,” he said.

Since coming to power in 2015, the Socialists have reduced taxes for lower income earners and rolled back some austerity measures launched during the country’s 2011-2014 bailout, including an across-the-board ‘solidarity’ tax that is being gradually phased out.

$1 = 0.8894 euros Writing by Axel Bugge; editing by John Stonestreet; editing by John Stonestreet

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