LISBON (Reuters) - Portugal’s government on Friday promised gradual cuts in corporate taxes from early 2014 as part of fiscal reform to boost investment and help drag the bailed-out economy out of its deepest recession since the 1970s.
Austerity measures under the 78-billion euro bailout have led to a steep rise in company bankruptcies and pushed unemployment to record levels of around 18 percent.
“The main economic priority is the attraction of local and foreign investment, and the reform of the corporate tax system is crucial,” said Antonio Pires de Lima, Portugal’s new economy minister, told a reporters.
The finance ministry said in a presentation the plan is to cut the main corporate tax rate to 19 percent in the medium term from at least 25 percent now. Additional local and state taxes mean that in practice the rate Portuguese companies at the moment pay a rate of 31.5 percent.
The government said the reform, set be carried out over five years, will also widen the tax base and phase out exemptions as well as local surcharges.
It added that the draft plan had been discussed with Lisbon’s troika of lenders - the European Commission, European Central Bank and International Monetary Fund - at the last bailout review that ended in June.
Finance Minister Maria Luis Albuquerque said the plan is to make Portugal’s company tax system “one of Europe’s most competitive” via the reform that began under her predecessor and architect of Lisbon’s austerity drive, Vitor Gaspar.
The ministry added that “a 19 percent company tax rate is currently applied in Poland and in the Czech Republic, two countries with which Portugal competes to attract investment.”
Officials said concrete proposals for the reform will be published next week, then discussed with business groups and the civil society.
Reporting By Sergio Goncalves, writing by Andrei Khalip and Shrikesh Laxmidas Editing by Jeremy Gaunt.