The Permanent Court of pensions has been plumbed, but the statute that creates Contribution to Sustainability (CS) also predicted the increase in VAT and National Insurance contributions (TSU or call the Single Social Tax), measures whose fate still is open. The decision, found the PUBLIC, will be taken “soon” and there is still a final position.
Within the government there is, at this point, any indication that with the end of CS automatically drop the VAT increase (from 23% to 23.25%) and TSU (from 11% to 11.2%). According to government figures, the increase in the standard rate of VAT would allow the State snaps EUR 150 million per year, which reverted to the payment of pensions. The increase of the contribution paid workers would give a boost of EUR 100 million to the Social Security system. The question is whether the government is willing to forego all or part of this amount, regardless of the solution will be found for the adjustment in pensions next year.
Asked about the fate of these increases, the Ministry of Finance did not respond. Also the Ministry of Social Security no answer about the future of TSU.
When presented the CS (that cut between 2% and 3.5% on pensions above the pension income above 1,000 euros) the government wanted to give the idea that the effort was transversal to the whole society, increasing the VAT and the TSU.
But the argument did not convince the majority of the judges of the Constitutional Court (TC) that in the judgment released on August 14, make it clear that “it is not the articulation of a measure to reduce spending on other parallel measures to increase revenues – as is the case with the additional contribution of employees to the social security systems and the additional standard rate of VAT -. they can give the contribution of sustainability sense of a measure directly focused on the sustainability of the pension system “
The TC goes further and says that even the government did not interpret correctly the judgment of January this year flunked the convergence of pensions, warning that put other strata of the population to contribute to the budget of Social Security is not enough to justify definitive pension cuts. “The judgment pointed (…) to the idea that the violation of expectations concerned only be justified in the context of a systemic and structural solution that was comprehensive enough,” refers to the Judgment 575/2014. “Surely this is not the situation when a strict measure to reduce pension without consideration of other factors, is simply accompanied by short-term measures to increase revenues, even in this way provides that if other strata of society contribute to the budget of social security, “adds the TC in the document released last week.
Formally, it is up to members to decide the fate of the diploma. Jorge Pereira da Silva, constitutionalist and professor at Catholic University, explains that the President will have to return the Decree 262 / XII Parliament, who must make one of two decisions. Or “expunge declared unconstitutional norms and send the remaining to enactment,” or “drop the whole diploma.”
Duarte Pacheco, deputy of the PSD, does not have any indication of when the Assembly Republic enjoy the diploma. That is if there is the case of wages urgency “because the court is to apply this year and has repercussions in the 2014 budget,” the issue of pensions “although relevant is less urgent.” “As [the diploma of pensions] is to take effect in 2015 we still have time to search for a solution,” said Mr Publico.
Reset CES?
If in relation to VAT and TSU nothing is known yet, also what will happen to pensions next year remains open. In the aftermath of the decision of the TC, the prime minister away more reforms. “Here I want to ensure that, as prime minister, I will not do any more rigorously proposal to reform Social Security until the elections of 2015,” Passos Coelho said on the Feast of Pontal in Quarteira.
But this does not mean that there can not be a repeat of the Extraordinary Solidarity Contribution (CES) in 2015, with or without changes. In this case, the measure would only be for budgetary matters.
Business advanced that this scenario would be evaluated shortly by the Council of Ministers. Is that judges oppose cuts permanent, as an extraordinary court as is the ESC could come to be accepted. In another judgment also released last Thursday the TC understood that wage cuts Socrates (between 3.5% and 10% for earnings above 1500 Euros) could apply this year and next.
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