Wednesday, October 19, 2016

The bank of Portugal finances almost 30% of the deficit reduction in the next year – Daily News – Lisbon

in Addition to the increase in 303 million of dividends, an institution must face a bill in the IRC of more than 129 million

The Bank of Portugal (BdP) will answer for 29% of the reduction of the deficit expected by the government in 2017, or about 432 million euros (0.23% of GDP). The contribution of the supervisor arrives by the increase of the dividend that will distribute and duplication of the IRC that you will have to pay.

THE OE provides for improvement of 1.52 billion on the balance of the next year. Of this amount, 303 million should come from the increase of the dividends paid by the BdP in the face of the 2016 – to 450 million. But for this level of dividends, the central bank must register 782 million in profit before taxes. Considering an effective tax rate of 28.1% – identical to that paid by the BdP in 2015 -, we speak of a rise of 129 million in the invoice of the IRC, from 91 million this year to 220 million.

Dividends: the less restrictive

In relation to the distribution of profits, the intention of the government is that Carlos Costa change the choice made in 2015 to increase the level of reserves of the bank. The option of the governor is seen by the executive as overly restrictive in the face of the policies of other central banks, has already increased in 95% of the provisions in the face of the shown in 2014.

But the option does not come by chance: it was in 2015 that started the Quantitative Easing of the ECB, which led the BdP to triple the Portuguese debt portfolio – five billion to 16 billion. The ascent of the provisions served to cope with the increase.

The question concerns the total size of provisions, With over 480 million accrued in 2015, the BdP went on to have four thousand million “side” to any losses, a figure that compares with the exposure of 16.7 billion to the public debt. Are almost 25%. In Spain, for example, the central bank has provided the equivalent to 10.6% of the exposure to Spanish bonds – 11.6 billion to 109 billion. In some euro countries, the provisions that don’t exist. In fact, there’s a level of provisions harmonized to the central banks and many of these have paid dividends as well higher: In Spain we speak of two billion delivered to the Treasury in Greece 1200 million.

To retain in the accounts, a higher level of earnings for reserves, the Bop will eventually be pointed to as a brake to the indirect impacts that the QE must have: central banks buy government debt, given the interest in this and return the same to the States by way of dividends. But as most of the gains have been diverted to reserves, the Bop registered less profits and, therefore, paid fewer dividends. And this can be a pormaior: calculations of Ricardo Cabral, professor at the University of Madeira, made in may, indicate that a position of the least restrictive of the BdP would have brought to the public accounts more to 0.2 points of GDP.

IRC: More profit, more tax

The level of provision of the BdP also has no fiscal impact. As these reduce the results, cut the taxable profit. Thus, the expected increase in dividends in the next year means that the BdP will register greater taxable income. To pay 450 million in dividends – 80% of the profits – the Bop should close the year with 562,5 million profit, which corresponds to 780 million in result before tax – assuming a rate of 28.1%, identical to the 2015. Thus, the profit of 562,5 million has implied the payment of eur 219.8 million tax, and more 128.9 million.


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