Analysis of the OE2027 proposal: Who will feel the relief of the IRS more?

A proposal from the State Budget for 2027 (OE2027) is already known and one of the measures includes a new relief from the IRS – who will be most felt this reduction? In absolute terms, “gets more who gets more“, explained Sérgio Vasques, a professor at the Law School of the Portuguese Catholic University, to News to Minutes. 

“In the IRS, there is a modest but real descent. In absolute value, earns more who earns more. Taxpayers who earn 1,000 euros a month have a savings of tens of euros a year, anyone who earns 2,000 or 3,000 euros a month has a gain that is measured in the hundreds. But it is true that at some point one had to look at the top of the table and the additional fee because there the rates have been little changed and the echelons have not followed inflation”, said Sérgio Vasques, who is the coordinator of a conference on the OE2027 that will take place this Tuesday, from 2:30 p.m. 

The event, organized by the Faculty of Law – School of Lisbon of the Portuguese Catholic University and by KPMG, will have an intervention by the Minister of Finance, Joaquim Miranda Sarmento, at the close.

“On the basis, the effect is virtually zero, with the minimum existence to follow only the development of the minimum wage. In any case, and as a whole, are not irrelevant to the middle class, even if the ranks are updated at a rate below expected wage growth. “bracket creep“, the teacher pointed out. 

What news does OE2027 bring?

It is already known that the OE2027 proposal does not bring great news, even because the finance minister himself explained that document is “expurged from said budgetary knights“. 

Sérgio Vasques considers that “rigorously [the proposal of the OE2027] does not bring many [news] and this is not only because the government is conditioned by the choices it has made, in particular regarding the IRS Young and reduced IRC rate, but because much of fiscal policy has been moved out of the budget“.

“ In direct taxes, in addition to the reduction of IRS fees already announced, we have small adjustments, on things like the treatment of productivity premiums or the IMT in buying own and permanent housing. In consumption, rates remain essentially untouched and perhaps this alone is not little new. We will see in the coming months if it is necessary to introduce measures of deepening deeper than what appears in the OE ", said the professor of the Faculty of Law of the Portuguese Catholic University. 

The impact of the IRC downturn

Asked whether the decline of the IRC to 18% makes the Portuguese tax system more competitive vis-à-vis other European countries, Sérgio Vasques considers that “it is a step in that direction, but of course it does not solve the problem“.

“First, we have the spills. If we add municipal and state spills we have a maximum rate of 28.5% for larger companies, which does not compare favorably with many European countries. The government's commitment to phase out the state spill once again was forgotten ", lamented.

Then, “the autonomous taxation, a creation that has been gaining its own life and today is an important burden for many companies, forced to pay them even when they find damage”.

“Third unpredictability. Tax benefits change every year, sector contributions continue to multiply. For those who invest ten or twenty years, all this is worth more than one point in the base rate of the IRC ", pointed the teacher.

Parliament will generally discuss the state budget proposal for 2027 on 27 and 28 October, with the overall final vote scheduled for 24 November.