Portugal’s New Government Faces Fiscal Balancing Act: Tax Cuts Now, Potential Hikes Later

Portugal’s new government is facing a delicate balancing act in its fiscal policy. While the coalition government has implemented tax cuts, an economist warns that the lack of a fundamental state reform could lead to future tax increases. This concern arises as the government plans to increase salaries for various public sectors, which would represent a significant and ongoing expense. The economist advocates for a thorough overhaul of the state to address this issue, alongside economic reforms aimed at sustainably reducing Portugal’s debt. They also emphasize the importance of promoting industrialization in the country and consider the reduction of corporate income tax (IRC) crucial for attracting investment. As the government prepares for the 2025 budget, the economist stresses the importance of the government taking initiative in engaging with the opposition to ensure its passage.