Portugal’s main opposition party promises tax cuts as election nears

January 7, 2022

By Sergio Goncalves

LISBON (Reuters) – Portugal’s main opposition Social Democrats promised on Friday to cut taxes on corporate profits and personal income if they manage to dethrone the front-running Socialist Party in a Jan. 30 election.

“We have to reinforce the competitiveness of our economy. We have to turn our economic policy towards companies because they are the ones that create better wages and better jobs,” the centre-right party’s leader, Rui Rio, told a news conference.

In its electoral program, the Social Democratic Party (PSD) wants to cut corporate profit tax from to 19% in 2023 from the current 21% and bring it down to 17% in 2024.

Income tax paid by families would be reduced by 400 million euros a year in 2025 and 2026, especially for middle-class earners of up to 60,000 euros a year.

There is also a temporary value-added tax reduction envisaged for restaurants, which have been heavily affected by the coronavirus pandemic, from the current 13% to 6% between July 2022 and December 2023.

Rio said growth expected to result from the tax cuts combined with more rigorous spending, with reforms needed in areas such as social security, health and education, should allow Portugal to reduce the budget deficit to 0.5% of GDP by 2026.

Although Prime Minister Antonio Costa’s centre-left Socialists lead in opinion polls, the PSD has somewhat narrowed the gap just weeks before the snap parliamentary election, which was called after parliament rejected the government’s budget bill.

Political analysts say the election alone might not solve the impasse as no party or workable alliance is likely to achieve a stable majority, potentially undermining the country’s ability to spur growth using European pandemic recovery funds.

(Reporting by Sergio Goncalves; Editing by Alistair Bell)