Finance Minister Fernando Medina has the unenviable task of drawing up next year's State Budget

State Budget approval “turns the page on political crisis”

But government strategy still receives a pasting

Trotting out one of the well-worn phrases of the last elections, Portugal’s prime minister António Costa marked approval of the 2022 State Budget saying the country has “turned the page on political crisis” and now needs to “roll up (its) sleeves and get to work.

“This is what the country needs; this is what the Portuguese deserve and this is what they surely want”, he said.

“This is a Budget that will allow young people, the middle class and families on lower incomes to pay less personal income tax. It will allow pensioners to receive, as of July, a special increase in their pensions with retroactive effect to January, as well as reinforce social facilities, starting with the national health service, also with the start of the free nursery programme as of the beginning of the next school year.” 

António Costa stressed the budget will improve “significantly the schooling programme for all young people who wish to study for their master’s degrees”.

“It is a budget that strongly supports economic recovery, whether by the incentive it gives to companies so that they can invest, or by the strengthening of public investment”.

Which is not quite the way opposition parties see it (none of them voting with the government; most of them voting against), nor the way Expresso’s editor in chief João Vieira Pereira sees it.

Mr Vieira Pereira sees a six year period in which Socialists have been at the controls, steering the country to the point where it is steadily coming in at the bottom of EU wealth rankings, with tax burdens that are “always increasing”, “miserable salaries” and house prices going up at such a rate that almost no young Portuguese can get on the housing ladder.

“The governments of the PS were in place to revert measures of the Troika and end austerity, even if this was a web of lies”, he writes. “The strategy worked so well that (the PS has) ended with an absolute majority without Portugal having become a better place to live in compared to 2015 – at least for the Portuguese.

“Just last year, tax revenue to the State grew €3500 million (meaning by €3.5 billion): 90% of this value was in indirect taxes. The strategy is not new, but it works. We reduce IRS (income tax) slightly and fill the economy with indirect taxes so the beleaguered tax payer doesn’t actually realise he is helping the State get fatter…

And this is where Expresso’s leader writer launched into what he believes is the real ‘shame’ following six years of Socialism: the fact that the Constitution’s cornerstone that ‘all citizens are equal in the eyes of the law’ has been completely ridden roughshod over.

He is referring to the fiscal regime “that allows foreign pensioners to pay 10% on their earnings, when Portuguese pensioners have to pay twice that amount… These foreigners live in Portugal, enjoy the same rights as any citizen, use hospitals, schools, benefit from the security, roads but for the State they deserve to be privileged because they are foreigners with money. Let’s be clear about this: a foreign retiree pays less taxes than a Portuguese, even when the pension of the latter is far less than the former. And a foreign worker arriving pays less than half the taxes than the (Portuguese) worker who works alongside him”.

“The government uses as an argument to defend this regime that the foreigners wouldn’t come if these benefits didn’t exist”, he explains. If this wasn’t morally wishy washy, he asks the question: “how many of these foreigners, due to paying less tax, are responsible for the exponential increase in the cost of housing, helping to expel the Portuguese taxpayer to other (less affluent) parts of towns, creating a domino effect that leaves us all poorer?

“The fiscal benefits for foreigners are one of our greatest embarrassments”, João Vieira Pereira concludes – and in spite of rumblings in the past over their fairness; over their long-term impacts, this budget, like so many others before it, has changed nothing.

True, it was the Socialists who agreed to start taxing wealthy foreigners 10% of their pensions (previously they had a tax amnesty for 10 years), but this glaring iniquity is likely to fester as the country ‘rolls up its sleeves’ to face another year of reduced spending power and stark economic uncertainty.

natasha.donn@portugalresident.com