Industry bosses perplexed by stalemate over State Budget 2025

 In News, Tax, Unions

The President of the Portuguese Industrial Federation (CIP) Armindo Monteiro says he is “perplexed” with the “political choreography” displayed by the governing PSD party and opposition PS party over reducing IRS taxes and agreeing over the IRS Jovem policy that could cut taxes for young people up to the age of 35.

In turn, Tiago Oliveira, the General-Secretary of one of Portugal’s largest unions, the CGTP, says that discussions over the budget are ignoring important aspects such as health, housing and salaries according to the business daily Jornal Económico.

Either way, both sides don’t understand the impasse created around the approval of the State Budget for 2025 (OE2025) by two measures, calling it “political games” which leave the country in suspension while MPs refuse to discuss more relevant issues.

The president of CIP – Confederação Empresarial de Portugal, and the General Secretary of the General Confederation of Portuguese Workers (CGTP) revealed their concerns as parliamentary debates continue to focus almost exclusively on the policies of IRS Jovem and IRC – although both have different interpretations.

Company bosses have pointed to the need to take investment attraction measures, whereas the unions highlight other important issues in the outline budget which have attracted little debate.

“I never imagined that my country would be at a standstill over two points of the IRC which have divided the two parties”, said Armindo Monteiro (pictured) calling the public discussion between the government and PS as “political choreography”.

Tiago Oliveira says that the IRS Jovem and the IRC are not “the fundamental issue”, but a deliberate strategy to focus the discussion on only two topics.

“There is a strategy being followed here that intends to narrow the discussion on the budget to two matters when the budget is much more than that,” he says, pointing to issues related to the health system, public services, housing or salaries and pensions that he says are being treated of secondary importance.”

Prime Minister Luís Montenegro has promised an “irrefutable” counterproposal and has presented an alternative costing model of the IRS Jovem policy which costs €600 million, instead of the €1.2Bn initially planned. He also has proposed reducing IRS from 21% to 20%.

In a final version on the tax policies agreed by the unions and the Government it had been decided to gradually reduce IRC by 2028 without any indication of the cut.

The amount of this decrease has now been presented to the PS leader, Pedro Nuno Santos, which retains the government’s across-the-board tax cuts which have been flagged up as a red line in these negotiations and which the government is not prepared to back down on.

The government says it will reject a proposal from the PS to change the cut in IRC and replace it with an extraordinary tax credit.

The Government says that with the economy growing between 2% to 2.5% and the ongoing Recovery and Resilience Programme (RRP), investment is accelerating, so the tax credit would not have a great short-term positive impact for companies.