Minister says he does not realize how moderate income of 2,300 euros rises prices

O minister of Finance said today to have difficulty understanding how the definition of the concept of “moderate income” in the EUR 2,300 could increase prices, arguing that it decreases the figures immediately above, up to 2,600 euros.

“ I find it very difficult to understand how, by setting the limit of moderate income up to 2,300 euros, this can contribute to increasing rents. I have no doubt that it contributes to reduce the rents that are immediately above,” said Joaquim Miranda Sarmento, in response to criticism by the parties on the left over the new law that lowers the rate of IRS from 25% to 10% for landlords who put up to 2,300 euros per month.

The sentence – said during the final round of the discussion of the State Budget for 2027 (OE2027) in general, at a hearing in the Budget, Finance and Public Administration Committee – motivated smiles and asides on the PS bench, leading Miranda Sarmento to interrupt the response to note the reaction of Ms. Sofia Pereira and ask her to explain her argument.

The Minister of State and Finance argued that “anyone who puts a house to rent – be it a big investor, be it a person who has saved and has a house available and that income helps improve the income of his family – thinks [with] how much he will stay after paying taxes”.

Then he explained what he thinks will happen to those who practice incomes above 2,300 euros and what will happen to those who practice incomes below this level, defined as the threshold of a “moderate income”.

“ Someone who has an income of 2,400 or 2,500 euros has a higher net income if they lower their income to 2,300 euros than if they keep it at 2,400 or 2,500 euros. Who has 2,400 euros and 2,500 euros pays 25% of IRS. At 2,300 euros you pay 10%. So 15% of the 2,300 euros – about 300 and a few euros – is the border where the person’s net income increases to lower the sale to the 2,300 euros,” he said.

“On the other hand, there is little economic rationality,” he said, referring to the risk, pointed to the left, that landlords with incomes below 2,300 euros increase the values to this limit, knowing that the fiscal incentive exists so far.

The minister argued that “if the market says that a certain house, with a particular typology, conservation status, in a given area (...) has a market income of 1,200 euros, how can anyone charge 2,300 euros? This is not possible”.

“ The rental market is not an oligopoly market, much less a monopoly. And, therefore, economic agents form the price according to supply and demand,” he added, stating that if a given house, on a given site, has an income fixed by the market of EUR 1,300 anyone who wants to put that income at EUR 2,300 will not be able to rent, it is as simple as this.”.

“ Moderate income increases the return for those who rent up to 2,300 euros, and if we manage to reduce the risk and increase the return, we are having more efficient solutions in the economy, and allows, in the border area, more or less between 2,300 and 2,600, that there is in fact a reduction in rents, because the net income of that tenant rents”, reinforced the minister.

Miranda Sarmento also stated during the debate that “economic agents make decisions based on risk and return” and that if I did not have a “risk-return relationship favorable to people putting houses on the rental market, economic agents will not” do so.

With the incentives created, it signalled, the government is “reducing the risk of those who put houses on the rental market” and, at the same time, reducing the IRS to increase net return.

The reduction in the tax rate to be paid on income from incomes low from 25% to 10%, when taxed autonomously, causing “a significant increase of 15 percentage points in net income”, he stressed.

The minister also said that this year 50,000 young people are being supported at Porta 65 Young, while the extraordinary income support program has 162,000 beneficiaries.