Public services to require 25% more taxes

Retaining current levels of public service spending in Portugal will require citizens in the long term to pay 25% more taxes and retire later.

This is because people are living longer according to a new intergenerational justice index that is being presented today at the Calouste Gulbenkian Foundation in Lisbon by the Institute of Public Policies.
The index has measured whether current generations will need to pay more to sustain spending on the environment, health, housing, poverty, standards of living, pensions and public finances, and if these will be in a worse or better shape in the future.
One of the more evident conclusions of the study is that public services spending will outstrip revenues in the future.
The latest calculations, which look at how much it will cost taxpayers long term based on public service spending in 2021, show that 25% more revenues will be needed over a 70-year timeline.
And while some indices show an improvement in the intergenerational sustainability of Portugal’s public accounts for the next few years, the long term picture is not so rosy given the greater ageing of the population.
The study does not suggest solutions or reflect on the causes of the imbalance, but says the imbalance needs to be studied and addressed.
Index coordinator Paulo Trigo Pereira said the goal was to put the issue of intergenerational justice on the political and public agenda, and also provide information and data so that policy makers can know that these problems exist and tackle them.
Another of the analyses was on a more equitable distribution of public debt between current and future generations. The index is based on average primary balances obtained over 15 years and the necessity to reduce the public debt over 20 years under European budgetary rules currently in force.
The results show that the efforts by the government to reduce public debt in recent years have not been excessive given the goals on the one hand; but on the other hand, suggest that the burden left for future generations in the medium term will be light under current budgetary rules in force, but not in the long term.
In the years studied, there was just one exception: 2019, the year in which the then minister of Finances, Mário Centeno achieved a surplus. However, for the other 15 years to 2019 budgetary efforts to cut the debt were more focused on the present.
But on pensions, the report concluded that the ratio of social contributions to finance pensions, and expenditure on pensions, had deteriorated between 2000 and 2015 with a clear negative impact for future generations.