Tax increases will push up interest rates

TAX INCREASES could provoke a rise in interest rates by the financial sector, claims João Salgueiro, president of the Associação Portuguesa de Bancos (APB), the Portuguese Banking Association.

The economist warned that any kind of corporation tax changes needed to be properly thought through because banks belonged to the wider international sector. The APB president was reacting strongly to a speech by Socialist (PS) member, Jorge Coelho, who said last week that the time had come for the financial and banking sectors to put their hands in their pockets and make a greater contribution to the present budget deficit crisis.

By this, he meant that there should be a revision or reversal of some of the financial exemptions and tax breaks that the banking sector currently enjoys. João Salgueiro said he couldn’t fathom the Socialist’s declarations because a bank operating on an international level is not tied to a government’s financial policy neither to special benefits.

He also stormed that Jorge Coelho was not part of the government and said that any changes to policies on the way financial institutions within the country were treated should come from the government or parliament.

“I think it’s rather strange that a policy initiative should come from the mouth of a party member rather than the Finance Minister, especially when it wasn’t first discussed with either the Bank of Portugal or the Portuguese Institute for Insurance,” he said.

Salgueiro stressed that the country’s main problem wasn’t the budget deficit, but its lack of competitiveness. C.G.