Medina says budget is a ‘political choice’

The finance minister said in an interview with SIC on Tuesday that the budget is a “political choice” and that the priority is cutting income taxes when asked about increasing expected indirect tax revenues.

“When we make a budget, we make choices, and I mentioned several options,” Medina said in an interview with José Gomes Ferreira, adding that the priority is to reduce income taxes.

Regarding the increase in indirect taxes, Medina responded by questioning the fairness of this choice.

“Is it fair or not, environmentally friendly or not, that cars that are not subject to the tax associated with an environmental component have one? (…) Is it fair or not to concentrate zero VAT efforts on the families most in need? “, he asked.

According to Medina, fiscal measures cannot be taken “thinking there is no tomorrow” but in a “balance” in which the accounts are kept in order, the budget surplus and debt reduction, so he said the government could “do more on levels and people covered [pela redução de IRS]but at the expense of other things.”

Fernando Medina also said that in a difficult external environment, the goal of the 2024 budget proposal is to “ensure the continued growth of the economy” and therefore the government wants to “try to counter this cycle and stimulate domestic demand and investment through companies, public and private.”

As for the future of his political career and eventual becoming PS leader and prime minister, Medina did not respond, saying only that he was “very committed” to the task at hand.

“When the time comes to talk about my future, I will say so,” he said.

In the macroeconomic scenario on which the budget proposal is based, the government forecasts that gross domestic product (GDP) will grow by 2.2% in 2023 and 1.5% in 2024, with inflation falling to 5.3% this year and 3.3%. in 2024.

The government led by António Costa aims to achieve a budget surplus of 0.8% of GDP in 2023 and 0.2% in 2024. As for the public debt ratio, it estimates its decline to 103% of GDP this year and to 98.9% in 2024. .

Among the main policy measures planned by the government are changes to the IRS, with the government estimating a negative impact on revenues of €1,682 million, with the largest share (-€1,327 million) coming from IRS reforms (such as minimum subsistence requirements, reduction commissions or level upgrades).

Regarding indirect taxes, it forecasts a positive revenue impact of €510 million from VAT measures, €364 million from the petroleum products tax (ISP) and €425 million from other indirect taxes.

The proposal for the state budget for 2024, presented on Tuesday to the Assembly of the Republic, will be discussed and voted on as a whole on October 30 and 31. The final global vote is scheduled for November 29.

The state budget is guaranteed to be approved by the parliamentary majority of the PS.