Abstract
Portugal and Brazil have personal income tax systems (IRPF/IRS) that allow taxpayers to deduct some basic personal expenses over the taxable net income. These personal deductions are foundation to a model of taxation of income and a vehicle to materialize the values of redistribution, personality, family protection and rates' progressivity of the income tax. These values embody the idea of social justice, which is widely established as a constitutionally value in many states, Portugal and Brazil included. This study analyzes the resilience of these core values in the face of situations of severe financial crisis, in which states adopt financial and tax reforms with the essential goal of more revenue collection. It is adopted as a case study the reform of the income tax in recent Portuguese financial crisis (2008 to 2012). During this period it has been partially implemented the Memorandum of Understanding (MoU) on the Determinants of Economic Policy, in which Portugal took over the obligation to make a huge effort of fiscal consolidation and financial sustainability of long-term public accounts by way of tax revenue. We conclude that the Constitutional values that shape the income tax model does not guarantee the highest standards of justice in taxation, since it does not prevent the essential mischaracterization of the income tax model for reasons beyond their idea of justice.
Keywords
Fiscal consolidation; personal income tax (IRS); personal deductions; tax reform