Country Rankings - Portugal
Oct 19, 2016 Portugal: confusedFinally, a question: when is a tax amnesty not a tax amnesty? Answer: When it's in Portugal, apparently. Correct me if I'm wrong, but isn't being encouraged to pay unpaid tax with the carrot of reduced or waived interest rates and penalties and immunity from prosecution the defining qualities of a tax amnesty? Not in Portugal apparently. It's a chance for everyone to repay their debts. At least I think that's what the Government is farming the "amnesty" as. It seems that the Government is worried that people racked up too much debt in the recent period of austerity, and should attempt to wipe the slate clean with the prospect of more bad times ahead for Portugal. And perhaps the Government is right to be concerned. If its own figures are correct, total tax debts stand at EUR22bn, which seems a lot for a country with a population of approximately 10.5m people. That's over EUR2,000 in tax debt for every man, woman, and child in the country. Of course, there's an element of self-interest here on the part of the Government. Because I'm sure the additional tax revenue from its "non-amnesty" wouldn't go amiss.
Feb 15, 2016 Portugal: disobedientNow back to harsh reality, and it doesn't take a genius in economics to work out that putting up taxes in a sinking economy is hardly going to be a recipe for economic success. Unless, that is, you are of a technocratic bent and work for a central bank, probably located in Frankfurt. It was somewhat refreshing therefore, to read the contents of a working paper from the European Central Bank, which came to the not completely unsurprising conclusion that tax hikes are unlikely to reduce a nation's debt if those tax hikes merely exacerbate that nation's economic problems. In short, austerity taxes are usually self-defeating. The uncomfortable truth, according to the conclusions of the working paper, is that cuts in government expenditure have a far more powerful effect on the fisc than increases in taxation. But governments don't want to hear that do they? Indeed, if you were talking to a group of Eurozone treasury ministers (I wonder what the collective noun is for that – a "fudge" perhaps...) about the ECB report, at this point they would probably cup their ears with their hands, and wail "blah, blah, blah! I'm not listening! I'm not listening!" So who do I execrate? Portugal has ruffled feathers in Brussels by proposing to ease austerity taxes in its draft budget for 2016, which is worthy of an encomium on its own. Greece, on the other hand, is proposing to tax its way out of the crisis by raising social security contributions and establishing a new 50 percent top rate of personal income tax. This is so the Government can water down extremely unpopular – but money-saving – reforms to the public pension system. I can see exactly why this proposal appeals. It's asking the rich to pay their share towards Greece's rescue, rather than some of the country's most vulnerable inhabitants. But the Tsipras Government is as a result falling into the same trap highlighted by the ECB report i.e. it is hiking tax to duck politically poisonous decisions on spending. It's far from the first time a government has looked for the easier option, and it certain won't be the last.
Nov 30, 2015 Portugal: unwiseThe idea of a single European market sounds great in theory. But it's very hard to integrate 28 countries into one economic whole in practice. And perhaps if EU member states like Portugal weren't quite so straitjacketed by EU laws designed to protect the purity of the Single Market, they wouldn't have ended up in the mess they did, or at least would have had some policy leeway to respond to unfavorable economic events. But that's almost a moot point now. Portugal isn't going to exit the EU any time soon, and is not much in a position to argue with the EU anyway. More to the point, I can't see Brussels ever wanting to tear up the EU Treaty, certainly not without an almighty fight. So it's austerity or oblivion for the bailed-out economies of the eurozone. Which isn't really a choice, so austerity it must be. I'm not enamored with this hard-nosed, technocratic approach to economic policy in Europe, which turns a blind-eye to human misery. But countries like Ireland, Spain, and Portugal have done much of the hard work and are showing signs of turning the corner. So would it be wise to change course mid-stream, as appears to be happening in Portugal now it has a left-wing Government in charge? Probably not. That might just prolong the agony. Still, if there's one good thing to come out of this, it's that, as Greece has shown, democracy just about appears to be alive in the EU, much to the annoyance of the technocrats.
Oct 23, 2014 Portugal: whistlingI do, however, feel sorry for Portugal. The decision to cut corporate tax in the Government's latest Budget was praiseworthy, but one gets the awful impression, as ominous economic clouds gather over the rest of the European mainland, that it is akin to whistling into the wind. Who's going to hear, or even be listening to the message, when the rest of the continent is once again fighting fires? Portugal exited its bail-out program earlier this year, but it is by no means out of the woods. The country was praised by the "troika" for some "ambitious" economic reforms during the period of austerity, but they evidently haven't gone far enough because the troika went on to warn that the economy still needs to be more "dynamic, flexible and resilient" and that making it so would be "challenging." One challenge standing between the Government and fiscal stability is the constitutional court, which has routinely blocked austerity measures ranging from public sector pay cuts to new taxes, such as the one proposed for public sector pensions. Without these Portugal is going to struggle to get its deficit down, and the longer this goes on, the more nervous its creditors will get about its ability to pay its debts, with potentially disastrous consequences for the economy. It's sad to say, but Portugal is just one of several European economies that are now reaping what they have sown by refusing to modernize their economies before the storm arrived.
Sep 19, 2013 Portugal: talks the talkIn Portugal, which is struggling through a vicious fiscal squeeze imposed by the death-dealing Troika, Economy Minister Antonio Pires de Lima came out as a tax-reducer this week, saying that any economic recovery will be unsustainable if taxation in Portugal remains so "aggressive." He wants the state to reduce its cost structure, within what is "acceptable and reasonable," so that it is in a position to give "more positive fiscal signals" to both companies and families in Portugal. Three cheers for him; let's hope the IMF doesn't drive a stake through his heart. In truth, he was merely echoing Prime Minister Pedro Passos Coelho, who has been promising to lower corporation tax, to 17 percent by 2018, or even lower, clearly highlighting the corporate tax rate as the most important factor in encouraging FDI.
Apr 18, 2013 Portugal: mistreat ChinaOne country which is conspicuous by its absence from the TPP talks is of course China. Although there are ongoing negotiations between the Middle Kingdom and various other countries, and China has FTAs with a scattering of other countries, notably including ASEAN and New Zealand, on the whole it is lagging. And it considers itself as an injured party in trade affairs, complaining this week about the level of "dumping" and "counter-vailing" measures it is subject to, particular emanating from the USA. A lot of the problem revolves around the designation of China as a "non-market economy" (NME). For anyone who, like me, finds it extraordinary that China should still be regarded as an NME, a word of explanation is in order: an NME is a country in which the State subsidizes enterprises or indulges in other non-market behaviour, despite WTO rules against it. So, an NME is allowed to cheat, if you will; but the other side of the coin is that for an aggrieved counter-party, the burden of proof is lower in anti-dumping proceedings. China's accession agreement to the WTO allows it to retain NME status only until 2015; but the change is not in China's gift, and both the USA and the EU persist in regarding China as an NME, despite frequent requests from China for them to treat it as a market economy.