The program of the Government, presented today at the Assembly of the Republic, reveals the administration’s plan to reduce personal income tax down to the eighth bracket, with cuts amounting to two billion euros by 2029, including a 500 million reduction by 2025. Corporate tax rates are also set to decrease gradually to 17% by the end of the legislative term.
The government argues that this fiscal reform will foster “economic growth acceleration,” though it acknowledges that its impact “should not be overestimated” due to prudential considerations.
In addition to promoting economic activity growth, the government asserts that the “budgetary sustainability of these tax reductions is bolstered by rationalizing existing scattered tax benefits to widen tax bases.”
The administration believes there is fiscal room for these tax cuts at a time when some institutions monitoring Portuguese public accounts foresee a return to budget deficits this year or next.
The Bank of Portugal forecasts a deficit of 0.1% of GDP this year and 1.3% next year, while the Public Finance Council predicts a balanced budget in 2025 and a 1% deficit in 2026.
The European Commission projects Portugal will achieve a budget surplus of 0.1% of GDP this year, which is expected to become a 0.6% deficit by 2026.
The government, however, anticipates a 0.3% GDP surplus, according to forecasts included in the 2025 State Budget and confirmed in the Annual Progress Report submitted to the European Commission.
The fiscal scenario estimates were not updated in this Government program, but the administration reiterates in the Finance chapter that “budget balance and public debt reduction are essential for sustainable economic and social development.”
This program from the XXV Constitutional Government, resulting from the May 18 elections won by the AD coalition (PSD/CDS), was delivered today to the Assembly of the Republic by the Minister of Parliamentary Affairs, Carlos Abreu Amorim.
The Government program was approved in the Council of Ministers on Thursday and will be debated in the Assembly of the Republic on Tuesday and Wednesday.
