Madeira May Flourish Under New Portuguese Government

Tax-News.com, Brussels

20 March 2002

Tim D. Wilkie, Managing Partner of Madeira advisory firm Corporate & Treasury, has commented on the outcome of Portugal's general election, which took place on Sunday, and its implications for Madeira.

Previous opposition party the PSD (Socialist Democrat Party) has won 102 seats out of a total of 230, but will need to ally with a smaller minority party in order to form a government. Madeira has returned 4 PSD members; key in terms of the PSD's overall seats of 102. This voting position will continue to be used to great affect, by the President of Madeira Alberto João Jardim, himself a senior PSD Member. But the results leave the PSD in a very vulnerable position, says Mr Wilkie, with only 45% of the seats in the National Assembly and they now find they have to enter into deals with the CDS/PP for their 14 seats.

Mr Wilkie says that prior to the elections the Madeira President, Alberto João Jardim, helped the Prime Minister in many ways, as a major party baron, and now the time for repayment will be coming. Jardim has already given his blessing to negotiations for the formation of a coalition government with the Christian Democrats though this will probably not include his giving up a promised Ministerial position for a Madeiran .

Says Mr Wilkie: "Our informed opinion is that Miguel de Sousa, Economist and former Vice President of the Regional Government of Madeira, will be the Ministerial choice. Miguel was one of the prime movers behind the formation of the MIBC (Madeira's fiscal State Aid scheme) and would be an important asset - Economics would be the ideal but a lot of trading has yet to go on. Guilherme Silva, re-elected to Parliament for the third time, is probably too able a Parliamentarian to give up to central Government."

Corporate & Treasury gives its predictions for Madeira's future under the new government:

"Madeira's discounted Corporation tax, between 2-3% discount over Mainland rate, will be maintained and the rate could go as low as 18.5%.

"When central Government has raised VAT in the past, Madeira's rate has not been increased. Expect the rate to be maintained at 12%. If nominally increased, this will be for a short period.

"The PSD manifesto made it very clear they were in support of Madeira's State Aid fiscal scheme continuing. We expect a major reorganisation of the Fiscal benefits and a vigorous negotiation with DG Competition and the Commission. The results will make the jurisdiction attractive to foreign investors.

"After last week's fracas when Antonio Nunes dos Reis, Portugal's Director General of Taxes, cancelled, 'sine die', his working visit to Madera, we expect Madeira to be conducting its own Tax Affairs autonomously from Lisbon. The cancelling of the visit resulted in the Regional President Jardim issuing a public and furious tongue lashing over what he claims was irresponsible meddling in political campaigns by an appointed official Self-regulation of taxes is one of the main planks of the Madeira's PSD election manifesto.

"Madeira will become more independent from the "continente" (Portuguese Mainland) and will, under the auspices of a newly appointed Regional Secretary, be responsible for not only their Direct and Indirect tax affairs but also Education, Social Services, Health and Public Works, Agriculture the Police and Customs.

"There will be no significant change in Madeira's discounted Direct or Indirect tax rates.

"Expect a solution to the EU State Aid scheme, which has been moribund since June 1999.

"Madeira, as a jurisdiction for ISP, telco & digital eCommerce, will become increasingly used by non-EU vendors establishing offices in the EU to comply with the Swedish Compromise and take advantage of the attractive fiscal and operating cost infrastructure. We also expect to see a migration of EU companies to the jurisdiction to ensure they are operating on a level playing field and receiving similar benefits."

Recommended