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Rui Baleiras: It is worse to lower VAT than to give checks


In this sense, he agrees with the Government: the anti-inflationary package of 2,400 million euros presented by the Executive to contain the effects on families should not jeopardize the deficit target of 1.9% of GDP. But Rui Baleiras, coordinator of the Budget Support Technical Unit (UTAO), does not exempt the new plan from criticism. In the first place, because he does not agree with changes in taxes, such as those that the Executive wants to maintain in the ISP or make in the reduction of part of the VAT on electricity, or limits on income.

In an interview with the Observer, he argues that writing checks is preferable because they help consumers adjust consumption more easily. But he warns that the value should not be too generous, at the risk of being able to go against monetary policy and feed inflation, a problem that does not bring 125 euros, an amount “so small compared to the loss of real wages”. . The reduction of the VAT portion of electricity from 13% to 6% is a measure with a high “macroeconomic cost for the country for a practically zero benefit for families.” The Government accounts for the loss of tax revenue with this measure at 90 million euros until December 2023.

In the same interview, Rui Baleiras also warns of the risks of a recession on the horizon, which could occur as early as 2023. Given these fears, and the uncertainty about the future evolution of Covid-19, he recommends that the Government be “prudent” save money for a new layoff. “It is natural that the slowdown in economic activity – I do not know if it will lead to the product falling next year compared to the product of 2022 – leaves some companies with excess workers and it would be good if these people were not fired”, he argues .

The anti-inflationary package announced by the Government has some support for families. We still don’t know about business checks. But, according to the finance minister, there was a concern to preserve public accounts and reach the budget deficit goal of 1.9%. Was the government right to have this concern with the deficit and also with the public debt?
Has to have. The sustainability of public finances is a necessary condition for the State to have public policies in the various areas of governance. It is not an objective in itself, but it is a necessary condition for public policies to work effectively and, therefore, it is natural for the Government to be prudent in its financial allocation. It is curious that, on Tuesday, in the Financial Times, the main topic at lunchtime was a photograph of Prime Minister António Costa with the headline: ‘The Portuguese government’s anti-inflationary package ensures compliance with budget targets’. This is highlighted by the international financial press. This is very important for the credibility of fiscal policy in financial markets.

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Source: Observadora

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