Transversal IRC reduction from 21% to 19% divides government

Government and PS disagree on the cut of the IRC in the context of the much-announced and postponed agreement on competitiveness and income which, in the words of Prime Minister António Costa, aims to increase the average salary by 20% in the next four years. year. After the Minister of Economy and the Sea, António Costa Silva, revealed that it was the intention of the executive to reduce the nominal rate of the tax, this Wednesday the Minister of Finance, Fernando Medina, came to boil water and issued a decision take in negotiations with the social partners.

For the finance minister, a change in taxes is “a matter negotiated in good faith, in an open mind, of dialogue and respect for the partners at the negotiating table and not in the public square,” said Medina on the sidelines of the 7th Congress of Certified Accountants, which will take place in Lisbon until Friday. And he defended that, “in this matter of the IRC, as in all matters of the agreement, the government has a voice”. However, the tone of Fernando Medina, as well as that of the Secretary of State for Tax Affairs, António Mendonça Mendes, who has already refused a tax shock, does not agree with Costa Silva.

Even within the PS there is no consensus on this dossier, as Dinheiro Vivo knows. There are those who agree with a tax cut in general, others prefer it to be a counterpart to those companies that increase salaries or reinvest their profits, a proposition most defended by António Costa . Medina also emphasized that “executive branch positions are incorporated into the government program and favor, among other things, “strong, substantial support for investment, business capitalization, innovation and technology”.

The cabinet’s proposal will only be announced to employers and trade unions during the first meeting of the standing committee for social dialogue devoted to the income agreement, which will take place on September 28. Otherwise, Wednesday’s meeting of the working group between the Secretaries of State for Labor and Taxation and the social partners “has come to nothing,” CGTP leader Ana Pires told Dinheiro Vivo. “This was the fifth meeting and the government is still not coming up with proposals, which casts doubt on the usefulness of this group,” he criticizes. The trade union and employers’ federations expected something new at this meeting, especially after statements by the Minister of Economy and the President of CIP – Confederação Empresarial de Portugal, António Saraiva, who said he was confident in a cross-cutting cut of the IRC from 21 % to 19%.

An analysis of the latest statistics from the Tax Authorities (AT), referring to 2020, shows that of the almost 522 thousand IRC statements submitted, only 39.6% have paid tax.

To Dinheiro Vivo, the tax law specialist João Espanha clarifies that “this low value is due to the parallel economy that is very large in the country”. “There are thousands of companies that charge without an invoice, because it is cheaper and so they do not have the costs associated with IRC reporting obligations,” Spain justifies. But if so few companies pay the tax, most of which are large companies, does it make sense to lower the nominal rate? “Yes, because an extra euro in companies is an extra euro in the economy,” defends João Espanha. “Whether micro, small, medium or large companies, they will all benefit to a greater or lesser extent from this tax reduction,” the inspector defends. The problem of tax evasion needs to be tackled in a different way. Spain believes that the government should “create a simplified regime, a minimum tax specifically aimed at micro and small businesses”. From the specialist’s point of view, “reducing the IRC for companies that invest is not effective, companies invest when things are going well and then a tax cut is a big help”.

Portugal is one of the 38 countries of the Organization for Economic Co-operation and Development (OECD) with the highest maximum corporate tax rate: 31.5%. This amount includes several components: “nominal tax of 21%, municipal surcharge that can go up to 1.5% and government surcharge that can be up to 9% for profits above 35 million euros”, in addition to the autonomous tax on operating expenses, explains Joao Espana . The tax expert even defends that the state tax “should be abolished because it is a strong obstacle to attracting international investment, from large multinationals”.

The effective corporate tax rate, i.e. the amount of tax paid on companies’ accounting profits, has fallen from 19% to 18.4% in 2020, to the level of 2009, according to the latest statistics from the tax . The rate has not been this low since 2011, when it reached 17.2%.

Salomé Pinto is a journalist for Dinheiro Vivo