Portuguese Parliament Approves 2004 Budget

by Ulrika Lomas, for LawAndTax-News.com, Brussels

02 December 2003

The Portuguese Parliament late last month approved the government's 2004 budget bill, which contains provisions slashing both corporate tax rates and spending.

According to reports, the bill was passed on November 21 by a 119-111 vote.

Under the terms of the 2004 budget, corporate taxes will be cut from 30% to 25%, in preparation for a further 5% reduction in 2006. The bill also contains spending cuts designed to keep the country's budget deficit under the 3% threshold put in place by the Stability and Growth Pact.

Portugal was the first eurozone member to be criticised by the European Union for breaching the 3% ceiling, but after posting a deficit of 4.2% of GDP in 2002, increased taxes and cut investment to bring the deficit down to 2.7% of Gross Domestic Product.

However, observers have suggested that the government's plans to cut taxes (which Prime Minister Jose Manuel Durao Barroso argues is a necessary move in order to boost the country's international competitiveness) whilst at the same time trying to keep its deficit under 3% is likely to have a significant detrimental effect on social services.

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