Parliament discusses polemic 2017 budget

The 2017 State Budget, on which Portugal’s future credibility hinges, is now up for discussion in parliament with “the essential” boiling down to 15 points.

Diário de Notícias sets them out this morning as elsewhere the media is full of all the accompanying facts and figures.

With President Marcelo Rebelo de Sousa saying the government could start by reducing controversial lifetime pensions for politicians, and top-heavy pensions elsewhere in the public sector, the confederation of real estate and construction (CPCI) has warned that this could be the “last chance” to put Portugal on the path to economic growth.

The CPCI stressed last night that “since 2001, total investment in the country has fallen 37.5%, while investment in construction, responsible for half that amount, has reversed 55.4%”.

The pillars of the 2017 budget should be to “relaunch investment, assure fiscal equity and stability, define laws adapted to the necessity of economic agents and create and maintain a framework of safety and confidence for investors”.

So what are the government’s measures? DN lists first, increases to pensions – which have caused the greatest ruckus between the PS and its left-wing allies. The PCP communists want pensions to go up €10 per month, as does BE for all pensions under €838, but the result will be huge strain on State coffers (around €400 million), which will have to be counterbalanced by cuts elsewhere.

The end of the IRS surcharge: this, says DN, is to be phased out gradually.

More taxes for holiday rentals: as already leaked to the press, the plan here is to realign taxes of the Alojamento Local regime to coincide with those paid by long-term rentals. The changes could mean taxes increasing from the current 5% to 28%.

Fat taxes, for fizzy drinks, or drinks containing sugar.

An extra IMI rates tax on high-end properties: this has already been kicked around in the press and centres now on properties with a rateable value in excess of €600,000.

An update on the social benefits cap, which has been frozen since 2009. The plan here is to bring social benefits limits ‘up-to-date’ and in line with inflation.

A reduction of IRC (business taxes) for businesses in the interior. Designed to reverse the effects of desertification.

Allowing transport passes to be set against IRS declarations.

Reduction of PEC payments, which businesses are obliged to make ahead of IRC declarations, and which left wingers feel prejudice small businesses.

Reduction of deficit targets to 1.7% or 1.8%, against the original estimate by the government of 2.2% – 2.5%. This all hinges on “being immune” from any bank-related expenses, including the shoring up of CGD, and payments to “the damaged investors of BES”.

Ending IVA at point of importation. The plan here is to establish IVA payment only on the point of sale (of imported merchandise). This can only come in “in a phased format to reduce the impact on IVA receipts to the State”, says DN.

More dividends from Bank of Portugal to go to the State. This idea came from a working party which decided that Bank of Portugal “a great slice of profits obtained with public debt should revert to the State”.

Charges for renewables sector: this is another internal battle between the PS government and its allies who want to see extraordinary taxes for renewable energy companies reduced. DN suggests that the government “is willing to discuss” the parties’ various proposals “but without making public how far the desire to tax this sector goes”.

With the proposed budget presented today, it has to be sent to Brussels almost immediately, to arrive by Saturday (October 15).

There will then be over a month for debates before the draft document is put to a parliamentary vote.


Saturday saw all the national papers digesting the nuts and bolts of the proposed 2017 State Budget, with Expresso concentrating on the fact that, in the words of Finance minister Mário Centeno, this is a budget of the left, designed to spare the poorer in society at the expense of those with more means.
As a result, the latter group are in uproar.

Bloomberg has already covered the fact that international investors find the new tax on IMI “scary”, while right wing Opposition leaders dub the draft document now on its way to Brussels as a “taxpayers’ witchhunt, taking money by every means possible”.

Nonetheless, the Council of Public Finances led by redoubtable economist Teodora Cardoso has considered the government’s projections as to the macroeconomic scenario set out as “plausible”.

The state finance watchdog however has “alerted to the influence of external factors”, that could put the estimated GDP growth of 1.5% “at risk”.

For a complete rundown of the various measures, price increases and reactions, see the next edition of the Algarve Resident, out next Thursday.

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