Wednesday, 31 July: In a bid to make Portugal competitive and attractive to foreign companies, the PSD-CDS coalition is aiming to cut taxes drastically making the country a tax paradise like Holland and Luxemburg.
Correio da Manhã
«Rui Rio attacks Menezes and minister», writes Correio da Manhã as the PSD Mayor of Porto, Rui Rio, criticised the new Minister of Finance, Maria Luís Albuquerque, on national TV on Monday evening saying that she had become a “stone in the shoe” for the Government. In the same RTP1 interview Rui Rio, the long-standing Mayor and an economist, says he is “getting out of politics” for the time being unless something arises where he can be of “use to my country” but says he will not back PSD stable mate Luís Filipe Menezes for Porto, the lead horse candidate in the local elections race who was Mayor of Vila Nova de Guia for years but always criticised Rui Rio despite the fact they were colleagues in the same political party. Luís Filipe Menezes is awaiting the decision of the courts to see if he can legally stand for Porto because the law is unclear if a candidate that has already served the maximum three times in one municipality can stand in another or not. A similar situation is occurring in the Greater Lisbon area where Fernando Seara, who has served as Sintra Mayor for three terms, is putting himself up as a candidate for Mayor of Lisbon and is also awaiting a court’s decision.
«Pinto da Costa in farewell to Fernando Martins», says the tabloid Correio da Manhã as the FC Porto president attends the funeral of former Benfica president and personal friend Fernando Martins who died on Sunday. Also present were Antero Henriques, Luís Filipe Vieira, Jorge Jesus and the Benfica team at the Lisbon Cemetery of Prazers. Although only president of Benfica for six years Martins greatly improved the infrastructure facilities at the legendary Portuguese football stadium.
«Proposal to reform IRC corporation tax could take an extra €314m out of the State Budget for 2014» reports Público, as the Prime Minister, Pedro Passos Coelho confirmed the Government’s intention to lower the tax to 17% in 2018 and continue with a tax cuts policy in the years to follow, announced the prime minister in Parliament on Tuesday where the government won a confidence motion.
«Gaspar defends his successor in Parliament but the SWAPS controversy hasn’t gone away» says Público as the new Minister of Finance, Maria Luís Albuquerque, is quizzed at a Parliamentary sub-committee about what she knew and didn’t know over ruinous SWAPS on public companies which left the national treasury with an estimated €1.5bn black hole. The committee has been focusing on transition files handed from one Government to the other outlining the interest rates and risk insurance terms on bank loans taken out to sustain public companies. There are two files: one handed to ministers and another handed to secretaries of state. The first seems consensual and the figures stack up; the second seems a total contradiction. Both Vítor Gaspar and his successor have tried to smooth over arguments and contradictions, fairly successfully for now, arguments pointed out by the opposition whose MPs have been calling for the new Minister of Finance to resign for “having lied to Parliament” when she said she didn’t know the details and size of the problem caused by ruinously complicated interest rate calculations on risk that left the Government seriously out of pocket. Maria Luís Albuquerque maintains that she was “never warned by the former secretary of state to the Treasury, Carlos Costa Pina, that there was “any problem or risk from the SWAP contract instruments and that in her handover files there wasn’t “a single word mentioned about SWAPS”.
Diário de Notícias
«Municipal Councils will only lay off staff after the elections» states Diário de Notícias as the Government’s so-called “amicable severance agreement” will also include 80,000 local authority workers, but the councils say they will only make them redundant if Brussels picks up the compensation bill. The Government will move forward with the most ambitious cuts to the civil service ever between September 29 and November 30 in what has been called a “mission impossible” as many local authorities are in such a bad financial state they won’t have the cash to pay the compensations legally required.
«Gaspar insists that the minister was informed about the SWAPS» says Diário de Notícias as the former Minister of Finance, Vítor Gaspar, says that Maria Luís Albuquerque “knew full well the scale of the problem”; the new Minister of Finance claims she was never warned and blames the PS José Sócrates government.
Jornal de Notícias
«Porto gains Banco de Fomento» says Jornal de Notícias, Luís Filipe Menezes recalls that he was revindicated. Porto big shots are happy that Portugal’s second city will gain the bank’s headquarters, the news of which was announced by the Prime Minister in Parliament on Tuesday. Various political figures in the north say that it is recognition of the importance of the north for Portugal’s economy while critics say the operation is “propaganda” cooked up with local business leaders because the north has been hard hit by the crisis.
«Minister of Finance comes out well at SWAPS Commission inquiry» says Jornal de Notícias as the new Minister of Finance, Maria Luís Albuquerque, gives a convincing account of what she knew and didn’t know about the SWAPs scandal in which financial risk management contracts on bank loans for public companies at supposedly fixed interest rates ended up costing the State millions.
«SWAPS – Strategic Reserves Company will have to sell oil to pay for the €122m black hole» reports i as the negotiation of ruinous credit contracts with banks had a €169m loss impact for public companies as the Minister of Finance, Maria Luís Albuquerque, is grilled by a Parliamentary select committee on why the renegotiations of financial risk management contracts ended up costing the State millions if not a billion euros.
«Foreign Direct Investment to Portugal plummets 65% in the first quarter of 2013» as data from the OECD indicates that €452.4m was invested to March in Portugal which represents a fall of 64.7% compared with the same period in 2012.
«Passos Coelho wants an agreement with the PS to peg IRC Corporation Tax below 17%» says Diário Económico reporting on the Government’s Motion of Confidence tabled before Parliament on Tuesday. The Government is anxious to lower taxes once the ‘troika’ has left Portugal in order to attract back Direct Foreign Investment which fell by over 60% in the first quarter of the year. The majority took advantage of the parliamentary debate on the Motion of Confidence to call for talks with the PS socialists. The leader of the PS party, António José Seguro says he’s open to negotiate the IRC but doesn’t want a “union” with the Government. The Motion of Confidence was approved as had been expected.
What are the proposals for IRC reform?
The Government’s aim is to have a Corporation Tax rate of 17% by 2018. At the moment in Portugal the overall tax rate, taking also into account State and Local Authority overspends, stands at around 31.5% in some cases. The proposal is to slash this by two percentage points in 2014 and wipe out the overspend within five years. The idea is to turn Portugal into an export and import paradise for dividends and assets and attract FDI. In this way Portugal would have a fiscal regime more in line with Luxemburg and Holland. To do this the Government would scrap incentives to given to companies to create employment, often criticised as artificial rather than market-driven employment. Micro and small companies who remain in the organised accounting regime will have to pay a special payment of €1500 per annum against €1000 now. In addition it is proposed that companies can deduct the PEC they haven’t used for 15 consecutive years (now they can do so for only four). For SMEs with a €150,000 turnover or less these will be taxed according to the application of coefficients on declared results. At the very least they will have to be taxed on an amount equivalent to 60% of their minimum guaranteed annual net income.
Jornal de Negócios
«Reform of IRC makes share profits on listed companies soar by 15%», reports Jornal de Negócios, as REN and Sonaecom enjoy the highest increase in results. The impact on the value of companies is as much as €2.8bn.
«Strong arm tactic for 5%» says a Bola as Benfica and Turkish club Fenerbahçe fight over the transfer of Cardozo over 5%. The paper runs a story on what is blocking the exit of the forward player.
«Zé Love – José Eduardo enthusiastic with transfer», reports Record, as the player shines next to Neymar and has a tête-a-tête with Vágner Love. Bruma anxious to play, Kanu confirms contacts.
«Adán in the Lion’s plans» as the full-back from Real Madrid has already been approached by Sporting to succeed Rui Partício. “I’ve got carte-blanche to look for a new club at zero cost” he says.