PS denies that proposals lead to the deficit, accuses minister of dramatizing

O PS accused the Minister of Finance today of dramatizing the impact of the socialist proposals to amend the State Budget for 2027 (OE2027), stating that “there is no chance” of them bringing the country into a budget deficit.

The Vice-President of the Socialist bench António Mendonça Mendes reacted, in statements to journalists in Parliament, to the criticisms of Finance Minister Joaquim Miranda Sarmento, according to which the proposals of the PS would transform the budget surplus of 0.1% of gross domestic product (GDP), estimated for 2027, into a deficit of 0.2%.

“There is no chance that the PS measures, being approved, will lead the country to a deficit,” he stressed, accusing the Finance Minister of trying to “dramatize what is not dramatizable” and stressing that “the budget balance will be positive in what depends” on socialists.

“ The only reason there could be for the finance minister to be dramatizing is for the finance minister to know something about the budget that we do not know. In other words, it seems that the Finance Minister himself does not believe the budgetary targets he has set,” he said.

In particular, he contested Miranda Sarmento's argument, used last Friday in Parliament, that the suspension of the decrease of a percentage point of the IRC, proposed by the PS to finance the temporary reduction of the ISP, would only have an effect on tax revenue in 2028, stressing that "this statement is not rigorous".

“From the point of view of the IRC, it is very clear that the companies that pay the overwhelming majority of the IRC are companies that, in the third payment on account, adjust what is the tax to be paid in the current year and do not wait for the following year of delivery of model 22”, he argued.

The Socialist reiterated that the measures “pay themselves and even contribute to the health of public finances” and that tax relief measures and their compensation cannot be voted separately.

Asked about Miranda Sarmento's criticism that the PS presents measures for only three months, Mendonça Mendes accused the minister of not having read all the socialist proposals, highlighting an initiative that provides for a monthly assessment of the additional tax revenue resulting from inflation higher than that foreseen in the State Budget.

According to the deputy, the objective is that this additional revenue be returned to taxpayers from April 1, 2027, through measures then considered “more convenient”.

With regard to the doubts about the effectiveness of zero VAT in reducing food prices, Mendonça Mendes stated that the experience of 2023 showed that the reduction of the tax was felt by consumers and that it is up to the government to make an “effective taxation”.

“ I understand that this government is more lazy in its measures, but it is up to the government to carry out this effective supervision, as the PS Government did,” he said.

For the PS, the divergence with the government results from different political priorities, with Mendonça Mendes saying that the executive prefers “to give the landlords a tax benefit with rents of 2,300 euros instead of lowering the VAT on food” or to lower the rate of the IRC “instead of lowering the fuel to families and businesses”.

Among the approximately 180 amendments to the OE2027, the Socialists propose a temporary reduction of the Oil and Energy Tax (ISP) equivalent to the reduction of VAT on fuels from 23% to 13%, with effect from 1 January 2027 and an initial duration of three months, as well as a doubling of support for agricultural diesel, from the present 10 to 20 cents per litre.

To finance this tax relief, the PS proposes to suspend during 2027 the expected IRC drop at a percentage point.

The PS also insists on VAT exemption in the basket of essential food, financing the measure through the repeal of tax incentives associated with so-called moderate rents, with a ceiling of EUR 2,300.

According to the Socialists, all proposals put forward by the party will cost about EUR 480 million, while they have an associated revenue of more than EUR 500 million.