Simplification of the Portuguese "county" map is aimed at reducing complexity (duh!), improving service to taxpayers, while reducing public expenses. The last time this was done was 200 years ago - so, yes, it is needed, and yes, it took too long. The challenge though is to balance this with the need to keep people in inland Portugal, where the low number of inhabitants, rugged landscape and low education levels might hamper service improvement efforts. But, let's wait and see!
Sunday 30 September 2012
Friday 28 September 2012
What's the tax limit a society wants?
So, how far should society provide services to tax payers? But also, a strong push for efficiency - if society demands inputs put it is not ready to increase its tax burdens, where will it cut or how will it be more efficient? An interesting debate - and not, by any chance, an academic one. It is a real and very present one, especially in Western societies.
Monday 24 September 2012
2 words on the changes in the Social Contribution rate in Portugal
I am for the decrease on the Social Contribution rate (TSU) paid by the companies in Portugal. But I am against that decrease being funded by an increase on taxes on tax-payers. It needs to be funded through public expenses cuts. It is as simple as so.
Sunday 23 September 2012
Exploiting the Prophet
This is the name of a great article in The NY Times, presenting a balanced picture on what all the mayhem that is going in the Muslim World, because of a "movie" that insults Mohammad. Believe me, it is worth reading it.
Putting the budget back on voters hands
Participating budgets (sorry, I am sure there is a better name for this) are on a rise in Portuguese cities, putting back a (small) part of those cities budgets on the hands of the voters. Though the amount is relativelly small (you can see it in the Cascais example I am linking this post to), it gives an empowering sensation to tax payers - and the possibility to head start projects that they feel important for their areas. Now... don't forget to take part on them!
Saturday 22 September 2012
Next move
It really is good news that the Government has rejected the 7% plus rise on income taxes. Now, the next question is: what will it do to further finance the public deficit - I hope that it is a serious effort on the area of state expenses reduction, and I pray that doesn't need to be as violent as I usually say. But it needs to sustainably reduce the gap on state income vs expenses, while helping to relaunch the economy. Which is not an easy move - to understate the challenge...
Thursday 20 September 2012
Cut Public Expense
It is really the only way forward. The current public structure (including state-owned companies) is clearly overburdening the economy - not only with taxes, but also with bureacracy and inefficiency. Portuguese tax payers (and economy) are clearly choking due to this heavy, out-dated machine. Cutting it strongly (including laying-off several dozens of thousands of workers) is unavoidable (as well as tackle down corruption). We need this to low taxes and to drive economic growth.
Summing it up: More taxes are not the solution, simplification of public administration is.
Science fiction
According to Government projections, the announced measures that imply a 7% tax hike on individual income will compound only to a -1% GDP decrease (sorry for the double statement, just to make everything clearer), well below the current -3.2% in 2012. I am sorry for the blunt statement, but that seems like science fiction. Nobody can look at those predictions and consider them real.
But this is not a joke - it is a very serious matter. Because, truth is, a number of projections (tax returns, employment,...) rely on this figure. Which means that by not achieving it, the sovereign budget will miss its figures again. And then need a sharp readjustment - that will be exactly like this and send the economy tumbling even deeper into a negative spiral.
Why don't we cut unproductive spending in Public Administration instead? We know we will have to do it somewhere down the road, we know it will take time to succeed and we know it is the right measure. So... why don't we do it?
Tuesday 18 September 2012
Yes, Portugal lacks strategy
Let me fully agree and mirror Filipe de Botton's opinion - Portugal is nowadays a country dedicated to public finance and budgeting, without a growth strategy or agenda. I already said it several times, but let me stress it. Budgeting is only part of the problem - actually, I think that budgeting is just a surface issue. At its root, there is the massive uncompetitiveness of Portugal's economy. Growth would kick start employment, tax collection, internal and external economy. Growth would boost our GDP, dilluting deficit and debt. We need growth. And for that, we need a long-term strategy.
Monday 17 September 2012
Fully agree with Barroso
As you can see from my posts over the last few years, I think an European Federation is unavaiodable, to ensure financial discipline, an aligned growth strategy and more relevant political presence in the world. In today's world, you need scale - and a 25-plus set of small countries (each of them with less than 100million inhabitants) simply doesn't work. Those ways of working belong to the past...
Austerity and reforms doesn't mean huge tax increases
It means expenses cut and Public Administration reform. It means State intervention simplification. Laying off 50.000 public servants - and not delaying that, which is unavoidable. Exactly the opposite of what is happening.
http://economia.publico.pt/Noticia/merkel-defende-continuacao-da-austeridade-em-portugal-mesmo-com-recessao-1563406
Peaceful demonstrations
Let me congratulate the fact that 1 million Portuguese (around 10% of the Portuguese population) demonstrated peacefully on the streets of all major Portugueses cities on Saturday. The fact there were no major incidents (just 3 persons arrested for minor disturbance) is an obvious compliment to the Portuguese people itself.
Friday 14 September 2012
Tomorrow's demonstrations in Portugal
We all hope they are big enough for the Portuguese Government to understand it is taking the wrong path, by choosing tax increases instead of unproductive costs cutting. And we all hope they don't turn violent.
http://www.publico.pt/Economia/manifestacoes-antitroika-amanha-em-mais-30-cidades-em-portugal-1563045
Thursday 13 September 2012
It is exactly the other way around
The measures that were now taken by the Portuguese Government don't help to economic (and financial) recovery - they will actually choke the Portuguese economy. Instead of taking the path of cutting unproductive Public Expense, the Portuguese Government chose to increase taxes and take money out of the economy to fund the State - anyone that has actually watched the fall of the Soviet Union knows that is simply the wrong policy. It kills the market and the economy.
Still, it is important to carefully go through Miguel Macedo's words. He is subtly trying to drive the thoughts away from the violent attack to the Economy, saying that this is the only choice to recover access to international markets. He is deliberately forgetting that before this, the Government should cut on the number of public servants, public companies spending and bureacratic costs - that is their mandate.
Want to read a good interview from a respected economist and politician?
Read Manuela Ferreira Leite. I always told that she should have won the elections vs Socrates - her programm and true grit would preempt most of the austerity measures we are now having, by imposing softer measures of them when the time was right.
Wednesday 12 September 2012
How to kill an economy with...
... an absurd tax policy.
Portuguese people have bravely endured the austerity measures, and were (and are) ready for more. But, I really doubt they will passively let their economy be killed.
http://static.publico.pt/homepage/infografia/economia/TabelaIRSset2012/
The announced severe hike on tax rates announced by the Portuguese Government jeopardize any possibility of economic recovery. By taking the path of taking more money out of the economy through taxes (instead of actually cutting down on unproductive expenses), the Portuguese Government is actually increasing its blueprint on the Portuguese Economy, killing it. Any prospect of economical recovery has now been washed out by an irresponsible choking of private income and Demand.
Portuguese people have bravely endured the austerity measures, and were (and are) ready for more. But, I really doubt they will passively let their economy be killed.
http://static.publico.pt/homepage/infografia/economia/TabelaIRSset2012/
Tuesday 11 September 2012
Clarity and accountability
He (a member of Iceland's Central Bank) is right. And that is a clear difference between Portugal and Iceland - Portuguese accountability (in every dimension) is quite low.
http://economico.sapo.pt/noticias/islandia-defende-investigacao-ao-governo-portugues_117513.html
Sunday 9 September 2012
It is the Economy, stupid!
So, let me explain it:
Tax rate increase => Less Consumption => Less Tax income
On top of that
Tax rate increase => Less Consumption => Higher unemployment => Less Consumption and Higher Social Security expenses
Ah! Let me also say that:
Tax rate increase => Less Consumption => Lower Investment => Higher unemployment and low technology renovation of business tissue.
Tax rate increase => Less Consumption => Less Tax income
On top of that
Tax rate increase => Less Consumption => Higher unemployment => Less Consumption and Higher Social Security expenses
Ah! Let me also say that:
Tax rate increase => Less Consumption => Lower Investment => Higher unemployment and low technology renovation of business tissue.
Again, I make myself available to give free lessons on Economics to all the Portuguese Government members. Believe me, it has a positive return on investment for me...
Saturday 8 September 2012
Elasticities
For budget cuts and tax increases to work, they depend on a key concept to work - elasticity. The proportion of the effect of those measures in Consumption / Demand of goods and services in the economy. And, though the first signs were actually encouraging, it seems Consumption elasticity on the austerity measures taken by Portugal has now failed us, leading to weaker tax income for the State. But the point is that a tax increase like the one that has just been announced will only depress it further. It is the wrong measure. Government has not followed my advise of further cuts in unproductive expenses - and we will all pay for that.
Thursday 6 September 2012
"If I look behind, I am lost"
This sentence, often repeated by Daenerys Targaryen (the character from "Game of thrones"), is probably the perfect depiction of ECB's recent announcement that it will be buying euro country's sovereign debt in the market, in order to keep interest rates under control. Though the benefits are clear (it will also allow tighter control over who owns that debt), it escalates the risk of impact in Europe if things go wrong. But, what short term alternative is there, if the efforts for political and economical consolidation in the Eurozone have been so slow?
Saturday 1 September 2012
Are we hitting a break point?
I believe we might. Portuguese population has, until now, showed its legendary resiliency in bearing with the austerity that has been asked - to recover not only public balances, but also economical external ones. But, lets face it, the news and suspections on forgery of documents and corruption by some Government members (that have still not resigned), the (still) too high-level of spending for flaw State services and the distance to a balanced budget (that is pushing down the news that there might be a new surge on taxes) might push Portuguese society to a break point - and after that, Portuguese may show their fury vs a corrupt politic system. I agree with Adriano Moreira.
Subscribe to:
Posts (Atom)
Posts
