Porto, Oct. 11, 2024 (Lusa) — The Portuguese Business Association (AEP) believes that the proposed State Budget for 2025 is "far from what the country needs" and is no more than "a series of isolated measures" that lack an "integrating strategy."
In a statement released on Friday, AEP's General Council said that it "does not see the macro-orientation that it defends, in the sense of increasing revenue through the development of the economy and reducing taxes for citizens, workers and companies".
"Due to the circumstances and the political corset that we all know, the budget proposal amounts to a series of isolated measures, rather than a truly integrated development strategy," it said.
The AEP added that "the country, and companies in particular, need public policies that bring about a change in the growth paradigm and lead to the generation of revenue that corresponds to the wishes of the population and the political combat itself in the game of democracy".
Although "some of the proposed measures are positive", the AEP believes that "they have a limiting character and are far from what the country needs".
It mentions the IRS Jovem (Youth income tax) as an example, which it says is "positive in that it extends the beneficiaries to all young people, regardless of academic qualifications" but which fails because it was necessary to "act in general on taxation of labour income".
The association believes that the proposal to tax corporate income (IRC and state and municipal surcharges) remains "far below the level needed to increase the attractiveness of investment (domestic and foreign) and improve the competitiveness of the Portuguese economy".
"On the other hand, by not putting forward an expected reduction for the years following 2025, it introduces medium-term fiscal unpredictability, a critical factor in the business world," it added.
Concerning tax incentives, the AEP argues that "the fact that the IRC increase aimed at strengthening wage appreciation requires a minimum wage increase threshold, well above the inflation rate, makes the measure ineffective" since "in the current, strongly adverse context, not all companies and sectors will have the capacity to practise it".
"As an alternative, we reaffirm the importance of reducing taxation on labour income, which would have an immediate impact on improving workers" net disposable income," it said.
For the AEP, the intention to exempt productivity bonuses from personal income tax and social security and to raise the exemption limit for meal allowances is "positive", as they are "measures with an impact on net disposable income", as is the reduction in the autonomous personal income tax withholding rate on overtime work.
Even so, this reduction in the autonomous withholding rate "should be in its entirety and not by 50%, considering the dynamics of the labour market".
The association also welcomes the reduction in the autonomous vehicle taxation, but the AEP continues to advocate "extending the reduction to other categories, not just the supply of shows, namely representation expenses".
On the negative side, it says that "the government still wants to prolong the high tax burden, as a percentage of GDP [Gross Domestic Product]', reaching 35.7 % of GDP in 2025, practically the same level forecast for this year (35.8 %).
The AEP said that reducing the tax burden on companies and families was essential to "improve the country's attractiveness as an investment destination, as well as people's disposable income".
Concerning the macroeconomic scenario on which the budget for 2025 is based, the association believes that the growth of the Portuguese economy contained therein "is insufficient, taking into account the ambition of converging the country's standard of living (in GDP per capita, in purchasing power parity) to that of more developed European countries".
In the opinion of the AEP, it will therefore be "very difficult with this Budget to achieve the ambition" assumed by the finance minister when he presented the proposal to "Recover, Reform and Relaunch Portugal with responsibility".
On Thursday, the government submitted the 2025 budget proposal to parliament. The proposal predicts that the economy will grow by 1.8% in 2024 and 2.1% in 2025 and estimates a surplus of 0.4% of Gross Domestic Product (GDP) this year and 0.3% next year.
The proposal has not been approved in general, and the vote is scheduled for the 31st in parliament.
If the PSD/CDS government's budget proposal is approved in general with the PS abstention or, alternatively, with the favourable votes of the Chega, it will then be examined in a special session in parliament between 22 and 29 November. The final overall vote on the budget is scheduled for 29 November.
PD/ADB // ADB.
Lusa
