The numbers are not positive: Portugal is one of the countries with the highest tax burden among the 38 countries of the Organization for Economic Co-operation and Development (OECD). This is one of the main findings of the annual wage tax report – which puts Portugal in ninth place, ahead of countries such as Spain, Luxembourg, Greece, the Netherlands and Ireland.
When asked about the dangers of this conclusion, Paulo Rosa, an economist at Banco Carregosa, explained that “the capital factor is much more flexible than the labor factor, and it is much more rigid, but this trend has diminished in recent decades, driven by visual factors. Improving means of communication and transportation,” adding that the epidemic “has further reduced the rigidity of the labor factor, allowing the acceleration of remote work and gradual flexibility for the labor factor, which will search in the future for geographical areas capable of offering tax improvement.”
Moreover, the economist highlights that “there is a positive relationship between the tax burden and the adverse crowding-out effect on the economy. That is, with an increase in the tax burden, the unwanted crowding-out effect (decreased financial resources available to the private sector, which is increasingly absorbed by the growth of the state) increases ) ».
Henrique Tomé and Vítor Madeira, analysts at XTB, argue that the higher tax burden “creates a disincentive to employment, investment and development”. Therefore, they add, “the risks of capital flight within the country are increasing, especially in the upper social classes, and at the same time, an increase in the shadow economy.”
Thus, say XTB analysts, the increased tax burden “displaces private investment, both national and foreign”. In addition to all this, “the current tax burden hinders the growth of the country. There is less private investment and skilled workers who work for others often prefer to emigrate in search of better working conditions », they explain. They depict: «Portugal is taxed as a rich country, but we forget that we produce as a poor country.
In response to a question about how to control this situation, they said that this issue is “urgent” and “must be dealt with.” Thus, «the only way to solve it is to implement a financial reform in the country».
According to the OECD, the data for Portugal compares the unchanged tax burden on the average organization in the case of single workers (34.6%), and increases between two-income households and single parents. What are the consequences of these exacerbations? “The consequences will be that if the state fails to make good use of this family income,” say Henrique Tomé and Vítor Wood, “it will make them poorer, less motivated to produce, and in some cases may even encourage them to emigrate.” .
Public debt reached 90.3% of GDP
Just this week, the Council of Public Finances (CFP) estimated that public debt could reach 90.3% of GDP in 2027, a more favorable forecast than the one provided by the government in the Stabilization Program. In this regard, economist Paulo Rosa says, “A decrease in the public debt ratio to about 90% of GDP in 2027 is possible, taking into account high inflation for some time and preserving the current trend of increasing the tax burden.”
On the other hand, XTB analysts note that it is “difficult to know” which of the forecasts will be closer to reality, “but looking at these forecasts we can see that periods of high inflation are beneficial for countries with large amounts of debt, as is our case.”
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