Portugal Eyes Lower Corporate Tax Rate

by Ulrika Lomas, Tax-News.com, Brussels

31 July 2013

Portugal's Prime Minister Pedro Passos Coelho has indicated that the Government's main priority now is to lower corporation tax, to boost both domestic and foreign investment in Portugal, thereby creating growth and scope for further tax reform. Underlining the fact that it is worth being "ambitious," Coelho explained that the Government could reduce the corporate tax rate to 17 percent by 2018, as proposed by the reform committee, or could go further, placing Portugal more at the center of global flows of foreign investment.

According to Prime Minister Coelho, the "high tax burden" in Portugal is not only a "disincentive for businesses to invest," but also currently adversely impacts upon families in Portugal, affecting both savings and consumption.

Defending Government plans to focus tax relief efforts on companies in the first instance, Prime Minister Coelho insisted that without improving the business and investment environment, corporations will remain unable to expand, to invest, and to create jobs, thereby generating wealth. The Government intends to ensure that Portugal's tax competitiveness "compares well with other European countries," he emphasized.

Failure to address this issue will mean that the Government will never be in a position to reduce the tax burden on families and individuals in Portugal, Coelho argued, noting that it is therefore vital to lower administrative costs for businesses, and to create a tax framework that guarantees greater certainty and predictability for investment.

Concluding, Coelho underlined the importance of making sure that economic recovery is realized in a sustainable way. This goal cannot be achieved simply by raising taxes, the Prime Minister maintained, warning that although tax hikes might be a short-term solution to balance the budget, it will mean that a very high price will be paid in the medium- and long-term.

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