Portugal's 5%-of-GDP defence pledge could land on families' tax bills
A Portuguese Finance Ministry analysis warns that meeting NATO's target of 5% of GDP on defence by 2035 may require higher direct taxes on households.
The short answer: yes, we’ll probably pay for this. An analysis by Portugal’s own Finance Ministry concludes that the country’s NATO commitment — reaching 5% of GDP on defence by 2035 — may force higher taxes on households, because the growth the spending generates won’t, on its own, cover the bill.
Why does Portugal have to spend more on defence?
At the 2025 NATO summit in The Hague, allies agreed a new target: by 2035, each country should invest 5% of GDP in defence and related areas, with at least 3.5% going to core military capabilities and the rest to infrastructure and security. It’s a huge jump from the old 2% goal that Portugal only recently began to meet. The terms are spelled out in NATO’s official declaration.
How much could household taxes rise?
According to the Ministry’s simulations, boosting core military investment to that 3.5% of GDP could mean, by 2035, a rise in direct taxes on households of roughly 2.6 percentage points. It’s not a fixed figure — it depends on the budget choices made along the way — but it gives a sense of the effort involved. The study accepts that the investment brings lasting economic gains, just not enough to pay for the extra spending.
Doesn’t Portugal already spend 2%?
It does, and more is coming: Prime Minister Luís Montenegro expects to hit 3.1% of GDP on defence this year. The trouble is the gap between 3.1% and the 5% promised for 2035 — that’s where the hard sums begin. In the near term, the government will have to decide what to cut, what to delay and what to fund with new revenue. Put plainly: the promise made in The Hague will eventually have to show up in the state budget — and maybe on everyone’s payslip.
Image: Allied Joint Force Command Brunssum / Wikimedia Commons (CC BY-SA 2.0)
