Portugal rejects censure motion as Montenegro presents €800 million tax cut and pension bonus

Censure motion rejected in parliament

The Portuguese parliament rejected a censure motion against the government on 8 September 2026, with only the 60 deputies of the right-wing Chega party voting in favour. The motion was defeated with 104 votes against from the Democratic Alliance, Liberal Initiative, Livre, and PAN, while 62 deputies from the Socialist Party, Communist Party, Left Bloc, and JPP abstained. Chega leader André Ventura tabled the initiative following controversies surrounding Minister of Internal Administration Luís Neves, accusing the government of institutional degradation. Following the rejection of the motion, Chega deputies stood in the chamber chanting for Neves's resignation. During his opening speech in the debate, Prime Minister Luís Montenegro diverted attention to economic policy by presenting two household relief measures valued at a combined €800 million.

Income tax reduction up to the sixth bracket

The first measure reduces personal income tax (IRS) across the first six income brackets, which encompass annual gross earnings up to €41,639, including the sixth bracket between €28,400 and €41,639. The tax cut is estimated at €400 million and is designed to reach more than two million households. Because Portugal operates a progressive tax scale, the reduction in lower brackets also lowers the tax burden for taxpayers in higher income tiers. The government intends to apply the changes to withholding tax tables starting in November 2026, impacting standard monthly salaries as well as the traditional Christmas allowance. The administration noted that lower withholding provides immediate liquidity, although final tax obligations will be reconciled during the annual tax return in spring 2027.

The first, to grant an extraordinary supplement to pensioners progressively up to 1,611.13 euros, which represents an amount of about 400 million euros, to be paid together with the December pension.

Extraordinary pension bonus in December

Alongside the income tax adjustment, Montenegro confirmed that more than two million pensioners will receive an extraordinary financial supplement in December 2026. The pension measure carries an estimated budgetary cost of €400 million and applies progressively to pensions up to €1,611.13. The payout was originally foreseen in the 2026 State Budget depending on fiscal execution margins. Finance Minister Joaquim Miranda Sarmento indicated that the bonus structure will mirror the 2025 model, which provided between €100 and €200. Under that tiered system, pensions up to €537.13 received €200, pensions between €537.13 and €1,074.26 received €150, and pensions from €1,074.26 to €1,611.13 received €100. The Council of Ministers plans to approve both decrees during its upcoming formal session.

Economic impact and fiscal track record

The proposed tax cut is the fifth IRS reduction enacted under Montenegro and the third consecutive mid-year tax revision since 2024. The €400 million cost is smaller than the €500 million tax cut executed in 2025. Finance Minister Miranda Sarmento had cautioned in March 2026 that mid-year cuts would be more difficult due to public spending pressures linked to storm recovery and investments under the Recovery and Resilience Plan. Evaluating the measures, economist José Moreira noted that transferring €800 million to households strengthens immediate consumer spending and debt reduction capacity, particularly for lower-income families with limited savings, while simultaneously narrowing the government's budgetary cushion for unforeseen obligations.

We are facing a very significant transfer of income from the state to families. It is 800 million euros that cease to be available to the state and pass, directly or indirectly, into people's income.