IRC tax reduction will have positive benefit for Portugal’s GDP

A study on the ‘Impact of IRC on the Portuguese Economy’ has concluded that reducing IRC on companies would have positive consequences for Portugal’s GDP.

However, the loss of revenues for the government’s coffers implies the money will have to be made up elsewhere if it is not to reflect on the government’s deficit.

A reduction in IRC of 7.5%, which would place Portugal close to the OECD countries average, would increase GDP by 1.44% in the long term within 10 years.

The effect would be felt in investment, on greater company competitiveness, an improvement in family working incomes, and a knock-on positive effect on consumer spending.

However, the report states: “This reform would not pay for itself, and whatever the magnitude of the tax reduction, there would always be a positive effect on GDP”, but it would also require budget offset mechanisms, even if in the long term the effects on the budget would in practice be neutral and sustainable”.

This was the main conclusion from the study ‘The Impact of IRC on the Portuguese Economy’ financed by the Francisco Manuel dos Santos Foundation.