The evaluation of the increase in fines is presented by the office of the Secretary of State for Fiscal Affairs, Cláudia Reis Duarte, in the latest report on combating tax and customs fraud and evasion for 2024, delivered to parliament last week.
The document reveals that after approximately 26 million euros in debts were written off due to prescription in 2023, debts to the tax authority totaling 290.2 million euros were prescribed in 2024, representing an increase of 264.3 million euros compared to the previous year, a difference exceeding 1,000%.
The government acknowledges that this figure is “exceptionally high” and explains the increase by emphasizing that the “declaration of prescription does not indicate inefficiency in the services” of the tax authority, underscoring that the “timely” assessment of processes is a guarantee of “legal security and certainty, as well as the quality and efficiency of the enforceable collection systems”, to avoid “unnecessary coercive actions and litigation”.
In this case, the significant jump in the value of debts that the tax authorities fail to collect once they prescribe is not due to an exceptional increase in prescriptions of taxes that generate the most revenue, such as VAT, Income Tax, or Corporate Tax, but an increase in prescriptions of “other tax debts, notably the exceptionally high value related to fines”.
The report notes that the worsening is “justified by a central action of automatic prescription of fines, framed within the acknowledgment of prescription”, as outlined in article 175 of the Code of Tax Procedure and Proceedings (CPPT), which stipulates that prescriptions are “officially recognized by the judge if the tax enforcement body involved did not do so previously”.
While in the “other tax debts” segment the increase in prescriptions was 3708%, in VAT it rose by 38%, in Corporate Tax by 4.3%, and in Income Tax by 45%.
In total, 12.3 million euros in VAT debts, 6.3 million euros in Corporate Tax debts, and 5.8 million in Income Tax debts were prescribed.
Other tax debts amounted to 265.8 million, up from just seven million the previous year.
As a rule, a tax debt prescribes eight years after the year “in which the event generating the tax obligation occurred, or from the end of the year when the taxable event occurred, depending on whether it is a one-time or periodic tax”, except when there are legal causes that suspend and interrupt the counting of that period, as noted by the government in the report.
In the same document, managed by the Secretary of State for Fiscal Affairs, the government also accounts for tax debts annulled by the tax authority.
In 2024, annulments totaled 824 million euros, decreasing by 4.3% compared to 2023, when the amount was 861 million.
However, the number of annulments increased by about 64%, rising from 259,973 cases to 425,336. The increase results “mainly” from “the death/cessation of the offender”.
“Debt annulments are mostly due to the submission of substitute declarations to correct errors made by taxpayers, the success of appeal or grievance proceedings, the death or cessation of the offender, and annulments by decision of the creditor entity,” the report explains.
