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After several years of discussion about record levels of tax burden, the pandemic ended up solving the problem. The weight of taxes and effective social contributions on the wealth generated by the country has been reduced this year to 33.9% of GDP, the lowest value since 2012, the last year before the “huge tax increase” imposed by the IRS. Minister of Finance of the time, Vítor Gaspar.
Since then, in the last seven years, the tax burden has always fluctuated around 34%, peaking at 2.7 percentage points (from 31.7% to 34.0%) in 2013, the year of greatest austerity; and a second major acceleration in 2018 (from 34.1% to 34.7%), the year in which it reached a new record, renewed in 2019 (in both cases, the INE last month revised down the values by a tenth).
João Leão will certainly have several hot topics on his next visit to Parliament (like Novo Banco), but not the fiery discussions that his predecessor, Mário Centeno, had about the tax burden. The expected value for 2020, of 33.9%, is entirely due to the reduction in tax collection, from 25.1% of GDP to 23.8%. And it just doesn’t decrease even more drastically because there is a sharp drop in nominal GDP, on which the calculation of this indicator is based. In total, the State has less than 5 billion euros of tax revenue in a year (from 52.9 billion to 47.1 billion), but the fall in GDP will be around 17 billion euros.
Actual social contributions, the second largest component of the tax burden, have even increased slightly, by 0.1% of GDP, and now total 10.1%. But at a time when unemployment is increasing, how do contributions increase? Will it be another tower in the budget? This should not be the case (although it was precisely this indicator that caused the biggest adjustment in the budget for 2020).
Finance has already explained the numbers exchanged. The original version had a completely wrong table and not just towers
In fact, real social contributions are expected to fall by around € 500 million this year (from € 20,570 million to € 20,081 million), except that the effect of GDP, mentioned above, must be taken into account. In other words, given that the tax burden is calculated as a percentage of the wealth generated by the country, and given that this GDP is expected to fall drastically this year (-8.5%), the fall in social contributions is not big enough to accompany the country’s debacle. economic activity, which has a historically negative result.
To a large extent, and despite a certain increase in unemployment, this is due to the maintenance of jobs driven by the government’s dismissal measures.
In the following year, when the Government expects GDP to grow by 5.4%, the tax burden is expected to remain unchanged, although with slight changes in its composition. The weight of tax revenues in GDP is expected to increase one tenth, to 23.9%, and the weight of contributions, another tenth, to 10.0%.
OE2020. An unprecedented surplus of the tax burden
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