Taxes on fuel and money injected into TAP. Were Costa and Rio rigorous during the debate? – Observer

In an exchange of arguments with centrist deputy Cecília Meireles, during the debate on general policy, António Costa rejected that the current government had had any influence on the increase in fuel prices, which is even true considering only the current legislature, which began in 2019. What António Costa seemed to ignore is that his previous government was responsible for the biggest increase in the fuel tax in nearly two decades.

In 2016, in the presentation of the budget draft for January, the then Minister of Finance, Mário Centeno, justified the need for an increase in the tax on petroleum products (ISP) of four to five cents per liter to ensure fiscal neutrality vis-à-vis the drop in oil prices. The increase proposed initially was intended to ensure the “tax neutrality”, given the level of revenue that the State was collecting in July 2015 in VAT. The extraordinary increase in the tax on petroleum products levied on gasoline and diesel was one of the additional measures presented in Brussels to ensure compliance with the deficit in 2016.

To compensate for the loss in VAT, which is levied on the price plus the oil tax, the Government then bet on increasing the specific tax on gasoline and diesel. The only problem with these calculations is that the tax to increase would be oil, and since VAT is levied on ISP, the tax burden on fuel would rise a little more than the promised tax neutrality, probably exceeding five cents per liter in gasoline and diesel. Which would represent a bonus for the State in face of such loss of VAT revenue.

In addition to not having waited for the entry into force of the State Budget, having immediately increased the tax, the amount of the increase was even higher than initially estimated. Fuel tax rising by six cents per liter, this being the biggest increase since 2000, the government also committed to lower the tax if oil rose in price, with some conditions.

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Throughout the year, the Executive also downloaded the oil tax at around two cents on diesel and one cent on gasoline. But, to do the math, it used the evolution of the reference price estimated by the National Fuel Market Entity and not the final prices, which include the operators’ margin on which VAT is levied. This method never convinced the opposition and the tax bills for each liter of fuel gave reason to doubts. And in 2017, the Government of António Costa — not the current one, but the first one — made it known that the commitment to fiscal neutrality was only valid for the year 2016, making it clear that in the following years it did not intend to lower the tax, even if the price of fuels, and the VAT charged, would rise.

In 2016, the state collected plus 250 million euros in additional revenue (VAT and ISP) compared to what was charged in 2015, according to calculations made by Parliament’s technicians, the Budget Support Technical Unit, at the request of the opposition on the right. Data from the Directorate-General for Energy and Geology also showed that the increase in VAT charged on each liter of gasoline and diesel accompanied periods of oil appreciation, which goes against the argument used in 2016 to justify the strong increase in ISP.

Conclusion

In fact, in the current legislature, the Government has not increased taxes on diesel and gasoline — with the exception of the carbon tax, which has risen as a result of international prices, as acknowledged by the prime minister. But António Costa is far from being able to remove the burden that falls on his first Executive after the increase carried out in 2016 that quickly proved to be based on an inappropriate argument without the promised fiscal neutrality having been fully fulfilled, as the CDS insists on reminding everyone. the years.

Thus, according to the Observer classification system, this content is:

DECEIER

In the parliamentary debate on general policy, Rui Rio listed a series of amounts that, since 2016, the State has allegedly given to TAP. An accounting that the PSD leader threw to António Costa to support the idea that “TAP has always lived off the Portuguese taxes”. In the next intervention, when responding to Rio’s intervention, the prime minister said that “since practically the 90s” the State has not injected money into TAP.

Let’s do it by steps. In fact, in addition to the current injection of capital into TAP, it is necessary to go back to 6 July 1994 to find another approval from Brussels for state aid to the Portuguese airline (before the most recent, in a period of pandemic and because of that moment of exception). At the time, in the 1990s, the government of Cavaco Silva justified this need with the company’s precarious financial situation. TAP’s management already had an adjustment plan underway, which had led to more than a thousand workers leaving the company, but the European Commission demanded even more commitments.

The basic commitment of the Portuguese State was to manage to put the company in a situation of financial equilibrium four years after the injection of public money, fulfilling some requirements that provided for a reduction of almost 40% in the number of workers, an internal restructuring, greater labor flexibility or the wage freeze in the first two years of injection.

At the end of the restructuring, Brussels required Portugal to start, in 1996, the process of partial privatization of TAP’s capital. A step that was even attempted in the late 1990s. The agreement for the sale of 35% of TAP’s capital to Swissair was even signed, but with the bankruptcy of this strategic partner, it ended up falling.

In 2015, Passos Coelho announced the privatization of TAP to the Atlantic Gateway private consortium, formed by the American businessman David Neeleman (Azul) and the Portuguese businessman Humberto Pedrosa (owner of the Barraqueiro Group), but in October, in the Government of ‘gimmicks ‘, António Costa advanced with the reversal of the privatization process.

In fact, a capital injection into TAP, similar to that which occurred nearly three decades ago, only happens now, within the exceptional context created by the Covid-19 pandemic and which led the European Commission to make the aid regime more flexible. sector. Something that António Costa mentioned in his reply to Rui Rio: “[O Estado] it can now only inject money into TAP because it has had express authorization from the European Union to be able to do so. Without this authorization from the European Union’s Directorate-General for Competition, we could not have made this injection.” And this authorization applies to public or private aviation companies.

European airlines with negotiated state support of over €25 billion

Even within the framework of Covid, and as the assistance to TAP was given under the most demanding rescue program, there are requirements for a State to be able to support a public or private air carrier. Brussels determines that there must be “a credible restructuring plan, capable of restoring the company’s long-term viability without further public support”; “to contribute, at an appropriate level, to the costs of restructuring, to avoid that the entire burden falls on taxpayers” and “to implement measures to mitigate the distortions in competition created by the aid” considering, of course, that “the company cannot be rescued and restructured more than once every ten years”.

Conclusion

It is false that TAP has lived “always on Portuguese taxes”, as Rui Rio pointed out in the debate on general policy. In addition to the current injection of capital, under the exceptional measures under Covid-19, it is necessary to go back almost 30 years to find another injection of the State into the company. It was, moreover, prevented from doing so without express authorization from Brussels.

According to the Observer’s classification, this content is:

WRONG