The ANMP highlights the urgent need for a new Local Finance Law, emphasized during the XXVII ANMP Congress held in Viana do Castelo over the weekend. The call came via a document on local financing, led by Ricardo Leão, the Mayor of Loures, on the second day of the event attended by hundreds of local government officials.
The ANMP asserted the necessity of establishing a new Local Finance Law to address the current national and international context and to align with modern practices and public finance concepts. One key reason for this new legislation is to align with the average resource-sharing levels within the Eurozone.
Despite constitutional recognition of autonomy and subsidiarity, Portugal remains excessively centralized, limiting local governments’ roles in public resource management compared to European averages. The proposal also addresses the need to correct territorial asymmetries, abandon the assumptions imposed by the ‘Troika,’ adapt to demographic, climatic, and digital shifts, and focus on stability, transparency, and simplification.
The ANMP emphasizes that the political strategy in upcoming years should aim to bring municipalities’ funding in line with their European counterparts, especially within the Eurozone, while addressing current territorial disparities and modernizing the law.
Although there has been slight convergence recently, Portugal’s reality remains significantly distant from that of its European partners. In 2024, the share of local government revenue within the national public administration was 12.6% in Portugal, lower than the Eurozone average of 21.2%.
Municipal authorities suggest increasing transfers and raising the Financial Equilibrium Fund (FEF) to reflect conditions before the Troika, restoring it to 25.3% of the average IRS, IRC, and VAT, as it was until 2013 (currently, it stands at 19.5%), along with 2% of the same average assigned to the current Municipal Social Fund (FSM).
They also propose enhancing the Decentralization Financing Fund (FFD) to compensate for current underfunding and support the transfer of new competencies to municipalities. Additionally, strengthening intermunicipal entity revenues by linking them not only to each municipality’s FEF but to total State Budget transfers is recommended.
The ANMP also suggests expanding fiscal revenues and strengthening tax powers, proposing the creation of a single New Equilibrium Fund consolidating the existing Financial Equilibrium Fund (FEF), Municipal Social Fund (FSM), and Decentralization Financing Fund (FFD).
Moreover, the current law’s provisions are considered insufficiently clear, causing severe constraints on financial and administrative management, especially when allowing discretionary margins that lead to abusive and restrictive interpretations, resulting in insecurity and instability.
