If the proposed measures are adopted by the PS working group, austerity will not end the day after the elections, if António Costa is elected prime minister. However, the end of measures such as the 3.5% surcharge on personal income tax or wage replacement in the Civil Service will take place one to two years earlier than the in the proposal Steps approved Rabbit last week the Council of Ministers.
Read the full document here
PS will present his government program on the 6th of June, but on Tuesday made public economic alternative proposals working group composed of economists and coordinated by Mário Centeno. The report is entitled ‘A decade for Portugal: An alternative economic scenario’.
In the scenarios, the aim is a gradual end of the IRS surcharge in just two years, in 2016 and in 2017. The working group estimates that the budgetary impact in the second year reduction of this tax revenue is equal to the 430 million Euros, which, he believes, will result in a “positive impact on economic activity.”
As for replacement of wages in the Civil Service, the Socialists want to reset the pay cuts 40% per year between 2016 and 2017. This is twice faster than the predicted by most PSD-CDS, which showed a replacement of 20% per year until 2019.
In his statement to reporters after presenting the report, António Costa stressed that, on the one hand this document “is not the Bible» , opening the door to a possible decline in some measures, on the other, shows that “you can turn the page of the austerity policies” .
“This study shows that, with other policies and turning the page of austerity, it is possible to obtain better economic results and better results both from a budgetary point of view, both in terms debt trajectory. The end of this year [2019] shows that the country can grow at an average of 2.6 percent, reaching a final deficit of 0.9 and having a debt to GDP ratio (gross domestic product) better than one that is likely ‘, he said.
Revolution in Social Security
The economic proposal of the Socialists provides major changes in the contributions to Social Security. First, a gradual reduction by 2018; then a gradual replacement until 2026.
Therefore, in the monthly payroll of workers for others and those who have an independent income (which includes green receipts, for example), the Socialists want a reduction from the current 11% of Single Social Tax (TSU) to 9.5% in 2016, 8% in 2017 and 7% in 2018. From 2019, the contribution rate increases 0.5 pp / year, being restored in full in 2026.
“These changes apply only to workers under 60 years and whose current contribution rate is the maximum effect. Does not affect the intertemporal financing of Social Security, “reads the document presented on Tuesday.
The socialists want, from 2021, new pensions are adjusted ‘in proportion to the lower contribution’, ie, the application of this framework will only ‘effect between 1.2 and 2.6% “and” will only be felt in receiving pensions from 2027 ‘.
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The working group ensures that ‘neither the minimum pension, neither current pensioners will be affected by this measure. ”
In this proposal, there are several changes in the financing of Social Security. The Socialist Group proposes that become channeled to the Social Security inheritance tax to the higher value heritage, notably from one million euros.
Other points listed in this chapter are also the ‘reversal of the planned reduction in corporate tax and revenue assignment; companies penalty mechanism with excessive rotation of workers, because they impose costs on the social protection system are not financed by the companies, “reads the document.
These three measures aimed at extending the financing of Social Security “are used to compensate for a reduction in the contribution rate paid by the employer up to 4 percentage points to all permanent contracts’, justifies the proposal, and will be, economists believe the PS, a “stimulus to permanent hiring.”
About the changes to Social Security, António Costa argued that the temporary cut ‘aims to give a boost to the improvement in households’ disposable income’ and argued that this is a “financially balanced measure” that “not affect current pensioners or those who are less than five years to reach retirement age. ”
The Secretary-General also justified the extension of the Social Security funding sources to date essentially financed by workers’ wages and the total wage bill of the companies, which “is penalizing a good collective bargaining and a disincentive to sustained growth of the wage bill. ”
“It is proposed to extend and diversify the Social Security funding sources, also going to be financed by the creation of a new inheritance tax on large inheritances (more than a million euros) and by committing to Social Security the new rate against precariousness. There will also be no continuing the process of current reduction in the corporate tax rate, creating a social IRC with revenues also assigned to Social Security. “
term contracts only by replacing
The socialist proposal, the forward contracts are limited only to the temporary replacement workers. Ie ‘no longer universal rule of contract, and restricted its use only the replacement workers situations,’ says the document.
This measure is intended to an application of the limitation of the possibility of hiring, thus favoring the contract of unspecified duration.
The economic proposal of the group led by Mário Centeno also focuses on ‘via conciliatory on termination of employment contracts with enhanced compensation’ with the employer, in the case of new contracts, which provide ‘all reasons economic reason (market, structural and technological) that have called into question the survival of employment ‘.
For this scheme, the payments to spend 18 days in the first 3 years worked and, after that period to 15 days per year worked.
annual salary supplement
The economic scenario proposed by PS includes a salary supplement with a view to greater social equity. Accordingly, and without quantifying the Socialists intend to apply a ‘ tax credit ‘ in labor income and income level and household composition.
This additional salary proposal, that the document does not quantify its impact will be awarded only to “individuals who reported employment income” and presupposes also serve as the ‘incentive for integration in the labor market’, regarded by Socialists as a “universal mechanism to combat poverty by promoting employment ‘.
In the context of social equity, the socialist working group also plans a “replacement of the social minimum” in families with Social Integration Income, Salary Supplement for the Elderly and Child Benefit.
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At the end of presentation of the measures, which aim at the upcoming parliamentary elections, António Costa also left a message to the PSD.
“This report is not provided for no new cutting pensions , and is stated to be no need to wait for the end of the next legislature to eliminate the surcharge IRS or the full replacement of employees’ salaries in the public sector. You need to speed up this spare, you can ensure a return to normality, “he said.
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