Portugal’s 2025 Budget Faces Backlash Over Dual Bank Tax Breaks

Portugal woke up to its annual budget debate with the sense that another fault line has opened between the Government and the radical left. Overnight, the Left Bloc (Bloco de Esquerda) branded the 2025 spending plan a boon for bankers and a threat to already-strained public services. The clash is not just partisan theatre—it touches on mortgage payments, constitutional law, and the Government’s ability to keep Brussels satisfied while calming voters worried about the cost of living.

A Budget that Stirred Immediate Fire

Barely an hour after the draft State Budget reached parliament, Left Bloc coordinator Mariana Mortágua stepped before the cameras to denounce what she called the “budget of fiscal inequality”. Her argument in a sentence: the document “removes money from those at the bottom and hands it to those at the very top,” chiefly the banks. Mortágua’s team says the benefit arrives through two channels. First, the headline rate of corporate tax (IRC) drops from 21 % to 20 %, a change the party insists will swell profits at the country’s five biggest lenders. Second, an “additional solidarity levy” created during the pandemic is set to disappear, erasing a charge that yielded roughly €40 M in 2024. For the Left Bloc, both moves amount to a double gift to an industry posting record earnings while many Portuguese cannot keep up with rising rents and food bills.

Why the Left Bloc Sees a Double Gift to the Banks

In Mortágua’s reading, the tax cut is only half the story. She points to a broader environment of regulatory leniency, from generous allowances for tax-loss carry-forwards to exemptions enjoyed by real-estate funds. The party argues that, taken together, these tweaks siphon “hundreds of millions” from public coffers—money that could fund public housing, trim waiting lists in the SNS health service, or lift minimum pensions. The bloc also reminds voters that Portuguese taxpayers spent €13 B rescuing the sector after the euro-zone crisis, a bill still hanging over the national debt. “There is simply no moral or economic rationale,” Mortágua said, “for yet another fiscal holiday for an industry rescued by the very people now tightening their belts.”

Government Fires Back: Constitutional Ruling Tied Our Hands

Finance Minister Miranda Sarmento counters that the elimination of the pandemic-era levy is not a policy choice but a legal obligation. On 9 October, the Constitutional Court struck down key articles of the charge, declaring them incompatible with the principles of equality and capacity to pay. As a result, the state must refund about €200 M collected since 2020—a blow to this year’s deficit target. Sarmento insists the Cabinet is already “working on a fresh mechanism” to ensure the sector keeps contributing, but stresses any new tool must avoid another constitutional collision. The Minister also notes that the sector-specific bank contribution (CSB), in place since 2011, remains untouched and is expected to raise €210 M next year.

What Do the Numbers Say about Bank Taxation?

Independent analysts paint a more nuanced picture. Thanks to the CSB and the now-struck solidarity levy, Portuguese banks pay a combined effective rate that often tops 25 %, above the headline IRC. That puts them broadly in line with Spain and Italy, two neighbours that also introduced windfall charges on lenders’ profits. At the same time, Portugal’s upcoming adoption of the OECD’s Pillar Two rules ensures large banking groups will face a worldwide minimum effective rate of 15 %. Critics inside the Left Bloc claim those numbers mask aggressive use of offshore branches and intragroup loans, but tax lawyers counter that similar structures exist across the EU and are unlikely to disappear unless Brussels rewrites the code.

Broader Stakes for Portuguese Households

Beyond the ideological sparring, the row lands at a delicate moment for families. Variable-rate mortgage holders have endured the fastest series of Euribor hikes in two decades, and rents in Lisbon rose 14 % year-on-year despite the Government’s recent caps on some contracts. Public-sector unions, meanwhile, warn that below-inflation pay rises will erode living standards for nurses, teachers and police officers. Against that backdrop, a perception—fair or not—that banks are receiving fiscal relief risks fuelling social tension. Political scientist André Freire observes that every Portuguese budget since 2011 has contained at least one measure framed as favouring financial elites, “and each time, populist rhetoric gains a little more traction.”

What Happens Next in Parliament?

The ruling coalition still holds enough seats to pass the budget, but the debate promises fireworks. The Socialists are flirting with targeted amendments to claw back some revenue, hoping to deny Mortágua the monopoly on progressive outrage. The Communist Party is preparing its own proposals for a higher capital-gains tax on speculative property deals. Markets appear unperturbed for now; Portuguese 10-year bond yields hover near 3.1 %, close to their summer levels. Yet insiders at the Finance Ministry concede that a drawn-out fight could test investor confidence just as Lisbon plans a new €5 B bond issue early next year. In short, whether or not the Left Bloc manages to rewrite the budget, its campaign has already placed the spotlight on who gains and who pays when fiscal knobs are turned in the post-pandemic economy.