For CIP – Confederação Empresarial de Portugal, a crosscutting cut of the IRC is not enough to respond to the inflation crisis, as the economy minister, António Costa Silva, announced on Sunday. “It is also necessary to lower the IRS, because taxes on employees ultimately affect companies,” CIP vice president Armindo Monteiro defended this Monday at the “Vital Signs” conference promoted by the employers’ federation.
According to CIP’s accounts, the state should have $6.8 billion in budget deficit by the end of the year to absorb a decline in the IRC and IRS. The reduction of these two taxes is one of the proposals that the CIP will present to the government as a counterpart to the salary increases, during the first meeting of the Competitiveness and Incomes Agreement that will take place next Wednesday, September 21.
“If the state reduces the progressivity of the IRS in terms of additional revenue, then it means it doesn’t benefit from what it plans to be the employee’s pay increase,” explains Armindo Monteiro. And there’s room to change both the IRS and IRC rates.
“According to the implementation of the budget, the collection of revenues in terms of IRS, IRC and VAT is increasing significantly. This is foreseen in the state budget for this year,” emphasizes Armindo Monteiro. The manager says this bonus “must return to the economy that generated it, because it was the families and businesses that, in the form of VAT, IRS and IRC, generated this revenue”.
According to the calculations of the CIP, the state should reach the end of the year with EUR 10 billion in tax and social security contributions, i.e. EUR 8 billion to maintain the current collection rate of taxes and social security contributions, which has increased mainly due to the maintain inflation. more than foreseen in the 2022 budget.
The expenditure related to the measures “announced for households of €2.4 billion and for companies of €800 million, excluding the credit line of €600 million, gives a total expenditure of €3.2 billion,” says the vice president from CIP. However, in the accounts of the socialist executive, the bill for measures aimed at families will rise to EUR 4 billion: EUR 1.6 billion in aid for the most deprived that was paid until August and now another 2.4 billion for pensioners and workers from the middle class. By adding this value to the support to companies, the total expenditure comes to 4.8 billion euros.
By comparing the amount of taxes and social security contributions the state should receive with the cost of extraordinary aid, Armindo Monteiro believes that “the government only returns 1/3 and keeps 2/3 for its own benefit”. In other words, if the state effectively obtains $10 billion in tax revenue at the end of the year, it will have spent only $3.2 billion, about 33% of the total amount of Social Security taxes and rebates, leaving 6, 8 billion left, about 66%, according to CIP calculations. Using government figures, we have to subtract the €4.8 billion in aid from the €10 billion in expected tax and premium income, which will result in a lower margin: €5.2 billion, or 52% of revenue obtained.
“There is currently a lot of pressure to raise wages” because of the ongoing price increases, warns the director of the CIP. “Now the state, which does not want to benefit more than the worker, should not allow part of this increase to flow back to the state and this is happening because we have progressive taxes,” defends Armindo Monteiro.
The CIP also understands that the state should reduce social security contributions. However, the reduction of the TSU, which has been the subject of intense debate in recent years, is not viewed with good eyesight by the government, as it could endanger the sustainability of social security.
Armindo Monteiro hopes the Competition and Income Agreement will be concluded before the approval of the state budget for 2023, given the social and economic emergency of this inflationary crisis that could lead to an economic recession.
Dinheiro Vivo journalist
Source: DN
