Opposition Slams Portugal’s 2026 Budget as Gift to Banks

Portugal’s left-wing opposition has reignited a long-simmering debate about who really gains when taxes go down. In its sights this time: the draft State Budget for 2026, which the Bloco de Esquerda (BE) brands a blueprint for “fiscal inequality” that shields banks while households wrestle with higher living costs. The Government counters that the proposal merely fixes an unconstitutional levy and spreads relief to every taxpayer. Behind the political theatre lies a wider question for people living in Portugal: who should foot the bill for recovery when public coffers are tight and mortgage rates still bite?

Why the row over bank taxes refuses to die

Bank profits have surged since the European Central Bank began lifting rates in 2022, a trend that left many mortgage holders feeling squeezed. That contrast fuels the BE narrative that the Budget tilts toward “those who can best afford it”. Fiscal specialists note that the banking sector already paid €210 M through an extraordinary contribution introduced in 2011, yet public anger persists because of record dividends and fat bonus pools. The new Budget, critics argue, arrives at a moment when families in Lisbon, Porto and the Algarve are struggling with rents that jumped almost 10 % this year, so any notion of extra leniency for lenders lands badly.

What BE says is hidden in the fine print

Mariana Mortágua, the recently elected BE coordinator, lists two key measures she believes create a "double benefit" for banks. First, the cut in Corporate Income Tax (IRC) from 21 % to 19 % applies across the board, but because banks generate some of the largest profits, the saving is outsized. Second, the Budget scraps the solidarity surcharge on banking, an additional impost created in 2020 and channelled to the Social Security system. Mortágua calls the removal a "shocking giveaway" because, combined with the IRC cut, it delivers "hundreds of millions" back to the sector while “no comparable relief” is designed for tenants or precarious workers.

How the Government defends its numbers

Finance Minister Joaquim Miranda Sarmento insists the surcharge had to go after the Constitutional Court ruled it incompatible with the principle of tax equality. “We would rather craft a legally sound way to tax the sector than keep a mechanism doomed to be struck down,” he said during the Budget presentation. The Government highlights broader relief: a 1-point average decline in Personal Income Tax (IRS) rates, extra €1.4 B set aside for pensions, and a promise to retain the 2011 extraordinary bank levy, projected again to raise €210 M in 2026. Prime Minister Luís Montenegro describes the plan as an "exercise in social justice that does not endanger fiscal balance".

The constitutional wrinkle nobody can ignore

The surcharge at the centre of the dispute collected roughly €40 M in 2025. After banks challenged it, judges argued the tax lacked a clear link to the cost it purported to offset, breaching proportionality rules. The ruling forced the Treasury to budget nearly €200 M in potential reimbursements for amounts paid since 2020. Legal scholars point out that ignoring the verdict could have opened the door to costly arbitration cases in European courts, so the Executive sees scrapping the surcharge as risk management rather than favouritism.

Crunching the revenue impact

Neither the Parliamentary Budget Unit (UTAO) nor the Public Finance Council (CFP) has released a line-by-line calculation of how much net revenue the banking tweaks might erase. Early back-of-the-envelope work by analysts suggests that phasing out the surcharge combined with the 2-point IRC cut could shrink annual receipts by €250-300 M starting in 2026. Against that, macro forecasts in the Bank of Portugal’s latest Boletim Económico peg GDP growth at 2.2 % next year, which the Government argues will partly offset lower headline tax take—but the CFP warns those growth figures may be overly optimistic.

Could a new levy rise from the ashes?

Sarmento has floated the idea of redesigning the 2011 extraordinary contribution so that it scales with bank balance-sheet size or exposure to variable-rate mortgages. That possibility—still embryonic—aims to recapture revenue without clashing with constitutional hurdles. Industry sources whisper that the Association of Portuguese Banks would accept a formula linked to assets so long as it stays predictable and sunset clauses are clear, yet no formal stance has been published. For now, both sides are calculating: the Government assesses legal safety; the Opposition scans for loopholes that might upset its argument of “privilege”.

What it means for households and small firms

While the headline drama focuses on banks, everyday taxpayers will notice changes elsewhere in the Budget. IRS brackets shift to allow a couple earning €38 000 to save roughly €400 a year, and micro-companies benefiting from the IRC cut might free up cash for pay rises. Still, energy subsidies phase out, and the freeze on public transport fares ends, potentially swallowing part of any fiscal gain. That trade-off shapes the BE’s claim that “the average family is left paying more indirect costs while bankers celebrate”.

Next stop: parliamentary trench warfare

Debate begins in earnest when the draft reaches the Committee on Budget and Finance next week. The Socialists must decide whether to side with the left on amending the bank provisions or support the centre-right coalition’s overall framework. Final voting is scheduled before Christmas; any amendments affecting revenue will require Brussels notification under EU fiscal rules, adding another layer of complexity. With municipal campaigns heating up, Budget talk will double as political campaigning, ensuring the fight over “who pays” stays front and centre right through to the New Year.