This afternoon, the Government of the Democratic Alliance (PSD/CDS) presented its state budget proposal for 2025, with an update of the personal income tax brackets, a new youth tax and a reduction in corporate tax.
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On Thursday afternoon, the Minister of Finance, Joaquim Miranda Sarmento, presented to the President of the Portuguese Parliament, José Aguiar-Branco, the draft State Budget for 2025 (OE 2025) proposed by the Government.
During the presentation of the document, the minister stressed that it is a “budget that seeks to reflect the government’s priorities and actions over the past six months”, that is to say the measures and programs already approved, as well as “what the Executive intends to do” in 2025.
Selon Miranda Sarmento, le SB 2025 “aims to reduce taxes on families, young people and businesses, to strengthen the income element”including for retirees, “valorize public administration” and to “focus on investment and implementation of the Recovery and Resilience Plan (PRR)”.
“It’s a good budget for the country which seeks to solve the problems of the Portuguese”he summarized.
The budget is based on a macroeconomic scenario of growth of 2.1% for 2025, “a cautious scenario with good prospects” in line with the main national and international entities, explained the minister, adding that the scenarios of the IMF and the Public Finance Council are even higher (2.3% for the IMF and 2.4% for the Public Finance Council ).
With regard to public accounts, the budget balance should be 0.4% of GDP in 2024 and 0.3% in 2025. As for public debt, the government estimates that it will be 95.9% this year and 93.3% next year . Miranda Sarmento believes that this is a “effort that the country must continue to make” so that, in 2028, the debt is close to 80% of GDP.
The Minister of Finance focused on the drop in tax revenues, predicting a 4.6% increase in personal income tax bracketswhile inflation is expected to be 2.3%, highlighting that “Personal income tax brackets will be updated at twice the rate of expected inflation.”
Total revenue, excluding PRR, will increase from 43.5% to 43.2%. According to the minister, personnel costs will represent 10.8% of GDP in 2024 and 10.9% in 2025, taking into account the agreements concluded by the government with certain civil service careers.
Social benefits will represent 18.3% in 2024 and 18.1% in 2025, due to the updating of pensions, which will be lower than in previous years, but “slightly superior” to inflation, he said.
Among the measures which now appear in the budget, the minister highlighted theextension of the youth income tax (IRS Jovem) to the age of 35regardless of the level of education, “correcting an inequality of the previous model” and allowing a 10-year period during which young people will benefit from tax relief. The government estimates that IRS Jovem will reach 350,000 to 400,000 young people.
The national minimum wage will pass also at 870 eurosto reach 1020 euros in 2028. The government explains that the minimum wage will also be updated, which will allow this remuneration to continue to be exempt from the IRS.
As far as businesses are concerned, the government maintains its proposal to reduce the general tax rate on companies of 1% to 20% in 2025, without reference to future reductions, as requested by the Socialist Party.
The state budget for 2025 also provides for a reduction from 17% to 16% in the corporate tax rate for small and medium-sized enterprises (SMEs) with profits of no more than 50,000 euros, the target being to reach 12.5% in three years.
“We ask the opposition to show responsibility”declares Miranda Sarmento.
Regarding a possible rejection of the budget, Joaquim Miranda Sarmento believes that “the country should be concerned” and that “the opposition must show responsibility”.
“I am convinced that the budget will be approved. It is a good budget for the country, for the elderly, for the most vulnerable and for businesses”declared the Minister of Finance.
Regarding the budgetary margin to be negotiated with the opposition, the minister stressed that the country had committed to generating a surplus of 0.3% with the European Commission. This is why he said he hoped that “the parties will be responsible and will not change this objective” who, according to him, “is fundamental to respecting European budgetary rules and reducing public debt.”
Miranda Sarmento therefore made a “advocacy for viability” of SB2025 in general, but also called for “responsibility in the specialty”.
The first vote on the general budget proposal is scheduled for October 31after two days of discussion.
It will be followed by a specialized debate within the parliamentary committees, where ministers will present the proposals relating to their area, and the process will end with the final overall vote on November 29.
In the current composition of Parliament, where the ruling parties, the Social Democratic Party (PSD) and the Popular Pari (CDS), do not have an absolute majority, SB2025 can only be approved with the abstention of the Socialist Party (PS) or with the votes of the 50 deputies of the far-right Chega party.
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