Lisbon, Nov. 26, 2024 (Lusa) - The article in the draft budget for 2025 of Portugal's right-of-centre minority government that will lower corporate income tax (IRC) by one percentage point in 2025 was approved on Tuesday, with the votes of the main opposition Socialist Party as well as the governing coalition, after the latter's two parties voted down their own proposal for a two-point cut.
The reduction in the main rate of IRC to 20% from the current 21% was made possible by the abstention of the main opposition Socialist Party (PS) and far-right Chega, while Livre, the Communist Party (PCP) and the Left Bloc (BE) voted against and other parties voted in favour.
Also approved, during this second day of voting in committee on the budget bill, was a cut to 16% from the current 17% in the IRC rate for small and medium-sized enterprises or small-medium capitalisation companies (‘small mid caps’) with profits of up to €50,000.
The one-point cut in the main IRC rate is a more cautious version than the one initially announced by the government, which had wanted to introduce a two-point decrease, with further cuts in the coming years.
However, following negotiations with the PS on the budget bill - which ended without an agreement as the PS did not accept any reduction in IRC, although it ended up committing to abstain on the bill on its first reading - the government opted for a one-point reduction, while the parties that make up the coalition tabled a proposed amendment to reduce the rate by two points.
After the PS announced that it would vote in favour of a one-point cut, the coalition parties kept their proposal on the ballot paper, but voted against it, alongside the PCP, Livre and BE. Far-right Chega went ahead and voted in favour.
Earlier, several opposition parties had voted in favour of proposals for changes to the IRC and municipal surcharge, but these were all rejected, as was Chega's proposal for a two-point reduction (to 19%) in the headline IRC rate.
According to calculations by parliament's Technical Budget Support Unit (UTAO), a two-percentage-point reduction in IRC would have reduced state revenue by €841 million in 2025, while winding up the surcharge would cost €1.280 billion.
"The projected IRC revenue in the PA-1909C scenario in 2025 [proposed by the coalition parties, providing for the rates to fall to 19% and 15%] is 841 million euros below the base scenario (which uses the rates in force), representing a drop of 9.8 per cent," states a UTAO report on the impact on tax settlement of this proposed amendment to the draft state budget for 2025.
LT/ARO // ARO.
Lusa
