20 Strategic Proposals to Revitalize Portugal's Economy Beyond Tax Reforms

AEP Unveils 20 Proposals for Economic Growth

The Portuguese Business Association (AEP) has raised its voice against limiting the State Budget discussions to just the IRC (Corporate Income Tax) and IRS jovem (Young IRS), emphasizing that fundamental economic issues remain unresolved. They advocate for a conducive environment that fosters business development, boosts exports, and enhances workers' disposable income.

On the day the Government pre-approved the State Budget for 2025, the AEP, representing Northern businesses, presented 20 proposals across five key areas:

Tax Attractiveness: Simplification and Reduction

• Reduce corporate taxation to enhance investment appeal, aiming for a 15% IRC by 2027 while positively discriminating for interior regions.
• Enhance tax incentives for innovation and environmental transition.
• Eliminate autonomous taxes gradually.
• Adjust IRS rates to reduce the high progressivity seen in Portugal.
• Exempt productivity bonuses from taxation up to a monthly salary equivalent.

Luís Miguel Ribeiro, AEP President
Ricardo Castelo/ECO

Demographics and Labor Market: Flexibility and Attraction

• Revise labor laws to allow broader roles for employees.
• Support youth hiring beyond immediate needs to ensure succession planning.
• Strengthen training support for workforce qualification.
• Facilitate the integration of immigrant labor, prioritizing Portuguese language education.
• Provide family support to encourage population growth, impacting the labor market positively.

Financing and Capitalization Improvements

• Establish a financing line for private investments backed by EU funds, enabling companies to receive advances.
• Adapt capitalization instruments to better suit Portuguese businesses.
• Continuously open EU fund competitions.

Business Resizing: Promoting Scale Gains for SMEs

• Encourage SME capitalization to achieve scale, proposing a minimum of 50% of profits for reinvestment.
• Strengthen support for mergers and acquisitions through tax amortization.
• Simplify regulations to reduce bureaucracy in mergers and acquisitions.

Streamlining State Relations with Businesses

• Simplify administrative, legal, and fiscal frameworks to enhance investment predictability.
• Acknowledge that the State's administrative structure can hinder economic development, and rapid responses can lead to productivity gains.

The AEP's proposals aim to tackle the economic challenges head-on, ensuring a more robust and competitive future for Portugal's businesses.