The European Commission ruled this Wednesday that the Portuguese tax system is complex and insufficiently transparent and recommended simplification, reduction of the associated administrative burden and improvement of the business environment.
In the specific report on Portugal, linked to the communication released this Wednesday as part of the European Semester Spring Package, European Commission technicians propose improvements to taxation in Portugal.
“The Portuguese tax system is complex and not very transparent. Tax expenditure amounted to 6.4% of GDP [Produto Interno Bruto] in 2022 and should increase further in 2023. Its economic efficiency would benefit from regular monitoring and evaluation,” the document reads.
Brussels recalls that, under the Recovery and Resilience Plan (PRR), Portugal foresees measures to fight tax evasion and modernize the tax system, but points out that in addition to the reforms and investments related to the plan, the country would benefit from “simplifying the system load, reducing the associated administrative burden and improving the business environment”.
The European Commission notes that in direct taxation, “advance payments often exceed the final annual tax liability of the taxpayer, resulting in rising costs for the taxpayer”.
The structure of the corporate income tax (IRC) “creates an additional burden for the tax authorities and for businesses”.
“Strengthening the efficiency of the Portuguese tax administration remains essential to encourage voluntary compliance, reduce tax evasion and fraud and improve the business environment,” he says.
The technicians also point out that the administrative costs of collecting taxes in Portugal have increased in recent years and that the time it takes to pay taxes “appears to be longer” in Portugal than in the European Union (EU).
Brussels also notes that “tax arrears have increased” and are “well above the EU average”.
Nevertheless, he believes that “the first steps have been taken to remedy some of these shortcomings in the Portuguese tax system”.
The European Commission is also proposing that, among other measures, to respond to the challenges facing the country, Portugal improve productivity and the business environment by investing more in innovation and reducing the administrative and regulatory burden or improving efficiency and performance of the public sector workforce.
Source: DN
