The Portuguese Government announced an additional cut in IRS rates up to the sixth bracket, taking effect in November's salary, as well as a bonus for pensionists. Both measures have a total budgetary impact of 800 million euros. The Minister of Finance, Joaquim Miranda Sarmento, guarantees that public accounts will close the year "at least" balanced, using tools such as spending underexecution to achieve this. The decision was announced during the censorship motion debate, just days after the Executive had rejected changing the tax rates.
The Ministry of Finance justifies the decision with favorable macroeconomic data: tax revenue execution reached about 55% until July, practically in line with the previous year, and economic activity performance is above expectations. Annual growth is already guaranteed at least at 1.8%, and may exceed the 2% target if quarterly forecasts materialize. PRR execution, the labor market, and immigrant contributions have contributed to tax revenue above forecasts.
Economists consulted by ECO point out that the Government may use spending underexecution as a strategy to balance accounts. Public investment execution rate has not reached 100% since 2017, and in 2024 it recorded the lowest level since 2014, falling 15.7% short of forecast. A former government official states that the Government may be giving "a check to the Portuguese" before the State Budget discussion to discourage the opposition from rejecting it and dragging the country into early elections.
Budget legislation is described as so bureaucratic that services have difficulty executing all expenditure, not just being a matter of budget cuts. Rui Baleiras, former coordinator of UTAO, emphasizes that "the time spent by thousands of public workers and managers" to obtain case-by-case authorizations is "colossal." An upward revision of nominal GDP is also planned, which could improve the public accounts position as a percentage of GDP.
