The government is on its way to the proposal for the 2024 state budget (which must be submitted within a week) and considers more than 20 billion euros in taxes and support to banks as lost, the Court of Audit (TdC) estimates in its advice on the Court of Audit of last year. State Account (CGE 2022), delivered to Parliament yesterday.
The amounts in question are enormous and although they will not keep public accounts under control for the time being, they will ultimately become a negative legacy that will weigh heavily in the near future and will require heavier and more sustainable fiscal consolidation in the coming years. warns the new advice on the closure of last year’s accounts.
For example, the value of irrecoverable taxes already exceeds 13 billion euros (including late interest and fees) and “has increased, more than doubling compared to the 2016 value (+170.5%), which is an increased risk factor for the sustainability of the economy.” public finances,” warn the judges, who conduct their analysis using public accounting (cash logic).
In the national accounts (logic of commitment), the government says it will again achieve a budget surplus this year, Prime Minister António Costa revealed in an interview with TVI/CNN Portugal on Monday.
However, the legacy of successive crises, the inability to collect tax debts (especially older ones and those of large taxpayers) and bad deals that sank the bank continue to weigh heavily.
Uncollectible taxes
According to the new advice from the TdC, chaired by José Tavares, the lion’s share is in taxes that are lost forever because they are “irrecoverable”. Some processes are so old that they date back to 1974, he reveals.
The total amount of this debt that will never be paid will, according to the group of judges, be approximately 13.2 billion euros, if we add default interest and legal costs.
The Court explains that at the end of 2022, the tax debt alone “classified as uncollectible amounted to 8,693 million euros, as a result of the handling of 7,271,745 tax recovery procedures, referring to debts since 1974.”
Trials involving half a million taxpayers are at stake.
The initial debt was slightly higher (9.3 billion euros), indicating that the debtors never really had the capacity or intention to pay taxes.
On top of the taxes themselves that will never be paid, there is still €4,123 million in default interest and €370 million in legal costs that will never be paid.
The situation of bad debts is serious and even affects the value of prescriptions: they have fallen because it is simply assumed that the collection process has definitively “failed”.
There are many cases in which it is no longer known who the debtor is, because this information has been lost over the years (for example in older processes).
“The bad debt corresponds to the defaulted debt, which occurs when it is shown that there is a lack of attachable assets of the debtor, his successors and of joint or secondary liability,” the Court explains.
“There are several factors that have contributed to the increase in bad debt, such as financial crises, the Covid-19 pandemic and the recent energy crisis.”
“In addition, there is the impact of the change in case law regarding the lasting effect of the interruption of prescribing, which has led to a very significant increase in the number of processes declared in default and a reduction in the number of prescriptions ( which exceeded 236 million). euros in 2019, to 41 million euros in 2020 and 11 million in 2021 (a decrease of 73.5%). However, in 2022 the value increased to 62 million euros (+474.1%),” according to the new advice.
These bad debts (8,693 million euros) “represent more than a third of the debts to be forcibly collected by the Tax Authorities (24,281 million euros)”.
According to the Court, “two-thirds of this debt relates to taxpayers with discontinued VAT activities”.
In the dark at Social Security
In the field of social security there also seems to be a serious problem in accounting for what the value of bad debts could be, but here the Court is more in the dark because the guardianship (the Ministry of Ana Mendes Godinho ) continues to allow “errors and omissions.” in the administration, assuming that debts “for which no collection is possible and which are still included in the annual accounts” are considered normal debts.
The study is not even able to reach an approximate value of bad debts, but notes an “undervaluation of taxpayers’ debts, since, contrary to the specialization principle of the year, for 43.3% of the debts, which amount to 6,022 million euros, no accrued interest is calculated and also due to the existence of late payment interest accounts with credits amounting to 41 million euros”.
In addition, the TdC notes an “overvaluation of customer debts due to the failure to record bad debt, with debts for which there is no possibility of recovery continuing to be reflected in the financial statements.”
“It is recommended that the Minister of Social Security ensures that procedures are implemented that enable the control of debts per debtor and that bad debts are registered when there is no longer any possibility of recovery,” the judges ask.
The hole in the banks
Finally, another gigantic tranche: the hole in the banks that the taxpayers had to pay for.
Until the end of 2022, as a result of the support to the banks, taxpayers suffered almost 22 billion euros in losses (it went to the budget deficit and the budget balance, and this does not include the quotas going to debt).
The Court says that half of this has already been irretrievably lost and that there are still 10.4 billion euros in ‘assets’ that are now worth little or nothing.
The TdC speaks of “a weak expectation that they will be recovered”, which amounts to: 5.3 billion euros in loans plus 4.9 billion euros in shares/capital plus 195 million euros in guarantees. They are about to evaporate because no one should pay for or buy such “assets” at a decent price.
Source: DN
