The Portuguese parliament has approved the government’s Budget Bill for 2004 that slashes corporate taxes amid growing economic instability.
The budget puts forward a reduction in the main corporate tax rate from 30 per cent to 25 per cent, with the intention to reduce this to 20 per cent by 2006. The coalition is pushing through government spending cuts in order to keep the country’s public deficit within the three per cent limit imposed with the adoption of the euro.
Prime Minister Jose Manuel Durao Barroso claims that the corporate tax cut is needed to boost competitiveness and fight rising unemployment. He argues that it will help the economy—which is expected to shrink up to one per cent this year—boost competitiveness and spur job creation. The government predicts a growth in the economy of between 0.5 per cent and 1.5 per cent, claiming that a recovery in the global economy will lead to a rise in exports of Portuguese goods.
