Lowering fees would be “more appropriate” than splitting the IRS tiers

Stressing that “typically, an IRS with many levels is an IRS that may in the future penalize increases in family income”, Paulo Núncio understands that increasing the number of levels will make the tax “more complex to apply and administer” .

In an interview with Lusa, the former Secretary of State for Fiscal Affairs of the Government of Pedro Passos Coelho therefore considers that, from a perspective of tax relief, it would be “more appropriate” to have “fewer levels, but with lower rates” than to increase your number.

“In my perspective, in terms of the design of the IRS, it would be more appropriate to have fewer steps with actually lower rates”, he stresses.

An increase in the levels, he says, reduces its scope, which “means that a small increase in a family’s income will determine or may determine an increase in immediate taxation”, because there is a move to the upper level.

In the current model (with seven levels) “16% of households with more income already support about 65% of the total value of the IRS”, he emphasizes, to justify that this shows that the tax is already “highly progressive”.

In 2012, when Paulo Núncio was at the head of the Secretary of State for Fiscal Affairs, the number of steps was reduced to five. During the first government of António Costa, the number increased to seven, and the prime minister has already indicated that the deployment of the 3rd and 6th echelons in the scope of the State Budget for 2022 (OE2022) is being studied.

Paulo Núncio emphasizes that if the objective is to return 200 million euros, the measure will have a very small impact on the families’ portfolio.

“It is a measure that will certainly serve to fill the news, but it will have a very small impact on the lives of Portuguese people and families”, he says, noting that 200 million euros represent less than 1.5% of the income of personal income tax, which is annually charged.

In addition to lowering the rates instead of creating more levels in the IRS, Paulo Núncio understands that, at the fiscal level, the priority should go to lowering the IRC rate — the tax that is levied on corporate profits.

“Right now, Portuguese companies continue to be subject to a very high IRC rate of 31.5% [soma da taxa nominal e das derramas, municipal e estadual]. It is the second highest rate in the European Union, second only to France”, says Paulo Núncio, considering that this situation makes Portugal less competitive than other countries with which it competes in attracting investment.

In this context, he considers that it would be “central” to resume the 2013 reform, “which was agreed by the PSD, the CDS and the PS, in order to gradually reduce the rate of companies”, also advocating the gradual reduction of spills, “until the its extinction”.

Regarding a reduction in VAT, as has been claimed by catering companies – as a way of mitigating the effects of the pandemic –, Paulo Núncio rejects the idea.

“I’m not in favor of selective reductions in taxation depending on the sector”, he says to argue that, in his opinion, “taxes are general and abstract”, so “they should be applied in the same way for all sectors”.

IVAucher, a program launched by the Government to stimulate consumption in the catering, hotel and cultural sectors, deserves praise from the former government official.

“I have a good opinion about the IVAucher program. It is a program that is based on the e-invoice system and has allowed a set of incentives to be given to consumers in general, to families in general, to consume and make more purchases in certain sectors that are hard hit. by the pandemic. I think this is positive,” he says.

However, and since the balance accumulated by consumers and which can now be discounted on new purchases in those sectors was around 84 million euros – below the estimated 200 million euros -, Paulo Núncio believes that the measure should be reintroduced next year and even extended to other sectors.

Also Read: OE2022: Spending Can’t Continue to Rise “Like There’s No Tomorrow”

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