A Budget for the Post-Truth Era

As long as the enormous weight of indirect taxes continues to worsen fiscal injustice and the State continues to play with an excessive exposure to external risks, the blame will always be on "the markets."

Shortly after the troika's departure, the Portuguese State is discussing a budget that resembles a Halloween party, preparing in an election year to hand out a box of sweets to a population in need of genuine economic progress.

Among the changes envisaged in the 2019 budget proposal, alongside the update to the minimum subsistence level and the adjustment to supplementary work pay so that it does not suffer a slightly higher withholding tax in the month it is paid, we have the absence of the usual inflation-linked adjustment to the brackets of progressive tax rates, which means in net terms a slight tax increase. On the other hand, a new tax regime for former residents who have not been resident in the last three years is introduced with some triumphalism, offering them a 50% exemption in the year of return and the four following years — which cannot but make us wonder whether the real reason for the measure is not to prevent those individuals, returning after five years, from benefiting from the non-habitual resident regime. Seen in this light, rather than the creation of a benefit to bring back Portuguese citizens who emigrated during the austerity policies imposed by the troika, we have in fact a measure designed to prevent returnees from benefiting from a regime created to attract a different kind of fiscal clientele.

The proposal also does not touch IRC very much, which is not without merit in light of the value of the fiscal stability so essential to economic free enterprise. However, far from abolishing the special advance payment, as has been reported by the media, it envisages instead the exemption from filing it for entities that request it, provided they have fulfilled all their filing obligations for the past two tax years. At the same time, another blow is dealt to actual profit, with the rates of autonomous taxation once again being increased.

And since there is no electoral room to increase taxes — which is to say, since it is not possible to operate on the patient without waking them — the Government is granted a legislative authorisation to create a new civil protection tax designed to circumvent the recent failures by the Constitutional Court against charges created to fund the costly expenses of civil protection, which in practice will be yet another addition to IMI, to be borne by all property owners.

It is enough for the State's economic context to change and remain under pressure for long enough for the very structure of taxes to come under pressure to change accordingly. Today we impassively witness the transformation of our fiscal state into a debt state, where instead of privileging taxes sensitive to the individual situation of each person — such as IRS and IRC — the anaesthetising potential of blind taxes is exploited, such as the new civil protection contribution, VAT and ISV, which not only take no comprehensive account of each person's contributory capacity, but penalise primarily taxpayers with less disposable income.

As long as the excessive weight of indirect taxes continues to worsen fiscal injustice and the State continues to play with its excessive exposure to the external risks of rising oil prices and market instability, the conditions will be in place for toxic exposure to situations to which neither the State nor we will be able to respond. At that point, it is to be expected that the politicians irresponsible for this lack of planning will blame the markets, resorting to the old technique of plausible deniability, so much in vogue in this post-truth era.