António Costa's Socialist Party government has at last put forward its 2016 state budget that plans for a deficit reduction to 2.6% of GDP, slightly under the previous coalition administration’s target of 2.8%.
This should gain the approval of Brussels but the European Commission will want to know the detail of how Costa intends to achieve this seemingly miraculous task as his relaxation of austerity measures already has pointed to an increase in government spending.
The draft budget will be discussed in parliament in the first week of February and includes increases in tobacco and fuel taxes and a rise in stamp duty, the hoped for result is an increase in revenue equivalent to 0.21% of GDP.
Costa’s bet is that the economy will grow by 2.1% as a result of giving the public more money in their pockets to boost the economy and overcome the projected €800 million fall in state receipts.
The draft budget document includes the form intention to continue the fight against fraud and tax evasion which will offset the revenue lost from reducing the surcharge on personal income tax, the reduction of VAT for restaurants to 13% on July 1st and the reduction in the Single Social Tax (TSU) for workers.
VAT on golf will remain at the increased rate of 23%.
Corporation tax will remain the same at 21% and the projected unemployment rate is down 1.1% on the 2015 figure to 11.2%.
