The Economic and Social Council (CES) has provided feedback on the proposed State Budget Law for 2026 (OE2026), acknowledging the potential impact of fiscal measures on the economy and the population. However, the council expresses that the proposal falls short of implementing a sufficiently ambitious fiscal policy change. This ambition is deemed necessary to promote fair income taxation, enhance investment appeal, improve wealth distribution, and contribute to transforming Portugal’s economic growth and social development profile.
The CES document highlights the continuation of IRS reductions, citing a 0.3 percentage point decrease in rates for the 2nd to 5th income brackets and the adjustment to keep the national minimum wage exempt from IRS. Additionally, it points to updating the values defining the nine IRS brackets by 3.51%, aligning with legal expectations. This update, however, falls short compared to the forecasted 5.3% increase in average remuneration per worker, potentially leading to reduced fiscal fairness compared to the 2025 update.
The CES notes that the proposed IRS scale updates exceed the predicted inflation rate for 2026 by 1.41 percentage points, as measured by the average IHPC variation, but fall below the 5.3% increase forecasted for average worker remuneration or the 4.6% salary appreciation reference from the October 2024 Social Concertation Agreement. The previous year saw a 4.6% update in IRS limits against a 4.3% forecasted average worker remuneration growth.
This opinion is released as political parties have the opportunity to propose amendments for debate and voting on the government’s initiative. Regarding corporate tax, the CES notes the reduction of the IRC rate to 19% and a decrease to 15% for the first 50,000 euros of taxable income for small and medium enterprises.
Overall, concerning macroeconomic forecasts and public finance trajectory, the CES records a real economic growth forecast of 2.3% for Portugal in 2026, which heavily influences the predicted budgetary balance. It also highlights the projected 0.1% GDP surplus in 2026 resulting from Social Security and Regional and Local Administration surpluses, despite a Central Administration budget deficit.
The CES appreciates that the proposal almost entirely avoids including ‘budgetary riders’, leaving room for more informed and extensive legislative discussions. Similarly, it positively views perceived progress in the “program-based budgeting” within the OE2026.
The CGTP issued a voting statement emphasizing alignment on issues like wage appreciation and combatting precarious employment and gender inequalities. However, it disagrees with certain recommendations, like the commitments from the 2024 social concertation agreement involving the government, employer confederations, and UGT.
[Updated at 17:32]
