All quiet on the budget front

Despite the scores of amendments from political parties proposed for Portugal’s State Budget 2026, it is “comforting to see so much calm in the political discussion over Portugal’s outline State Budget.

Who says so is the president of one of Portugal’s largest business and industry associations, Armindo Monteiro, president of the CIP (Industrial Confederation of Portugal).

Armindo Monteiro believes this scrutiny of political debate is healthy and is a sign of democratic maturity, particularly when the budget proposal from the government is not being overly dramatized simply for political gains and point scoring.

“The budget tends to attract opposition and discord often over matters that have nothing to do with the State’s accounts.

“I am well aware that the discussion of the OE26 is taking place under very particular circumstances. The Opposition is not in a position to make a big fuss, after the municipal elections strengthened the political capital of the Democratic Alliance (AD)”, says Monteiro.

Moreover, he says that with presidential elections in three months and it being impossible to dissolve Parliament, no one seems interested in provoking a political crisis. Finally, the Government itself has removed the Budget of measures with some delicacy, such as the new labour law.

“Nevertheless, it is healthy to be able to discuss the OE26 without the background noise of political chicanery. With this tranquility, citizens and companies win, who see matters of interest to them being debated in a more transparent and less demagogic way”, adds the CIP president.

On fiscal matters, the Government’s continued effort to reduce taxation on labour is to be welcomed, although we see an erosion of net wages. Indeed, the 3.51% update of the income brackets in the IRS table in 2026 is below what is necessary to ensure tax neutrality.

Up to June, year-on-year, wages grew above 7.0%. For companies, the government approved, outside the Budget, a gradual reduction in the nominal corporate income tax rate: reduction to 19%, 18% and 17% in 2026, 2027 and 2028, respectively.

However, there is still a lack, within or outside the budget, measures that foster fiscal competitiveness for our economy, meaning a reduction or even elimination of State surcharges or extraordinary taxes that strongly hammer large companies.

This refers to those companies who pay the lion’s share of IRC and yet are the very companies that create value, jobs and innovation. It would also be relevant autonomous IRC taxation to ease the contextual costs of companies, he concludes.