The competitiveness of the tax system, its simplification, the ongoing study of policy solutions, the stability of legal rulings and their interpretation in line with the objective underlying their creation, in particular in the case of tax incentives, has not been a priority and, unfortunately, 2023 has not brought (and will not bring) anything new to this area.

According to the main rankingsof reference, Portugal remains, and is apparently established, among the countries of its economic bloc that have adopted a tax system least favorable to investment, with the second-highest overall statutory rate in the OECD: 31.5%, according to the figures obtained from the OECD’s website.

Instead of returning to the path established in 2014, of simplification, expansion of tax bases and reduction of the statutory corporate income tax rate, there has been an insistence on intensifying the already patchwork quilt nature of the Portuguese tax system, betting on incentives and relief, produced and presented without any robust studies justifying them, often designed and implemented through legal rulings that do not facilitate their understanding by economic agents.

It is therefore not surprising that the brand new Tax Regime on Incentives for the Capitalization of Companies, published in the new article 43.D of the Tax Benefits Statute, has already had two versions, even in the discussion process of the 2023 State Budget Law, which approved it, and is now being changed again, in view of the various inconsistencies detected in the meantime and, moreover, the incredulity of those who make a profession out of explaining the technical content of these features to international clients.

The style of back and forth with which areas of importance for the economy of families and the country are legislated no longer impresses or disappoints. Take the case of local short-term letting accommodation, an activity subject to tax relief in 2020 with the attribution of multipliers from 0.35 to 0.5 in the simplified Corporate Income Tax regime (i.e., with a legal presumption of costs corresponding to 65% or 50% of the income generated, depending on the location of the properties). The intention now is for such activity to pay an extraordinary rate of 20%, applicable on a calculation basis that is unintelligible to ordinary citizens (and not only to them).

If any doubts remained, consider the plans being made to deal with and probably resolve claims regarding the legal nature of the so-called patent box regime and its submission (or not) to the quantitative limit applied to certain tax benefits. It is now being stipulated that this limit does not apply to the tax benefits contained in the Corporate Income Tax Code, when the issue is, and always has been, that of determining the nature of certain regimes. All of this is of an interpretative nature, i.e. based on a “miraculous” stroke of the pen, when, purely and simply, the controversy and headaches of those who invest and undertake business could have been avoided.

Despite this panorama, the apparent disregard for legal certainty and the various uncertainties generated at the international level, Portugal continues to be able to attract investment. Some investment. This is thanks to the sun, safety and talent generated in Portugal that, despite everything, spur the ability to undertake entrepreneurial activities and welcome those who seek to do business in Portugal.

However, in an increasingly competitive world, the tax system must be considered in a competent and integrated manner. It is necessary to simplify; to shift the tax burden from the most distorting taxes to those which distort business decisions the least; to reduce the so-called deadweight loss. It is necessary to provide new guidelines (and scales) for the tax effort required of families and companies, ensuring that this is applied to measurable macroeconomic objectives and is not wasted on useless or non-productive expenditures.

In addition, it is essential to guarantee the stability and foreseeability of tax law, whether by creating a disciplinary framework for the legislative function, requiring, for example, ex ante and ex post impact studies to be carried out, or by adopting procedures that encourage a public discussion of any tax changes.

Finally, because a competitive tax system is of no use if it is not well managed, it is important to promote an institutional alignment that encourages the adoption of foreseeable top-quality administrative practices, reinforces the capacity of the tax authorities in the various areas in which they operate, and is capable of creating a true pact of trust with taxpayers, taking advantage of the invaluable recognized technical talent of the workers and managers of the Tax and Customs Authority.

2023 has not been surprising, either positively or negatively. 2023 does not want to be an outlier. Until when?