LISBON (MNI) – The E78 billion Portugal bailout package to be
agreed formally between Lisbon, the European Commission, the ECB and the
IMF requires a streamlining of government and reductions in a wide range
of public services, according to a text of the Memorandum of
Understanding posted by the daily Diario Economico on its website.
As already announced, the overriding goal is to reduce the
government deficit to below E10.068 billion or 5.9% of GDP this year, to
E7.645 billion (4.5%) next year and to E5.224 billion (3.0%) in 2013.
Fiscal consolidation is to be maintained “over the medium term up to a
balanced budgetary position, notably by containing expenditure growth,”
according to the document.
The quarterly disbursement of financial assistance from the EU’s
European Financial Stabilization Mechanism (EFSM) will be subject to
quarterly reviews starting in the third quarter this year.
“If targets are missed or expected to be missed, additional action
will be taken,” based on government consultation with the three
supervisory organizations.
Next year’s budget must include a recalibration of the tax system
with a view to lower labor costs and boost competitiveness. At least
E500 million in savings are expected from reducing the number of
services “while maintaining quality of provision;” creating a single tax
office; reorganizing local government; cutting state transfers; and
revising public pay and fringe benefits.
Rationalization of the education system is to net E195 million,
including lower subsidies for private schools.
Limits on staff admissions in public administration are to achieve
annual reductions in 2012-2014 of 1% per year in the staffing levels of
central administration and 2% in local and regional administration.
Public wages are to be frozen in nominal terms in 2012 and 2013,
and staff to be cut 1% by 2014 in the central administration and by 2%
in local and regional administration. Health benefits for public workers
are to be cut E100 million in 2012.
Pensions above E1,500 will reduced this year with the aim of saving
at least E445 million, and indexation will be suspended next year except
for the lowest pensions.
Reform of unemployment insurance is expected to yield medium-term
savings of around E150 million
At least E515 million is to be saved in state-owned enterprises by
cutting operating costs by at least 15%, tightening compensation schemes
and fringe benefits, rationalizing investment, and increasing revenues
from market activities.
Capital outlays are to be cut by E500 million by prioritizing
investment projects and making more intensive use of EU structural
funds.
On the revenue side, corporate tax revenues are to be increased by
at least E150 million by abolishing all reduced corporate income tax
rates, limiting the deductions of losses in previous years according to
taxable matter and reducing the carry-forward period to three years.
Another E150 million in additional income tax revenue starting in
2012 is to come from capping deductions for health expenses and
mortgages and taxing all types of cash social transfers.
Property tax revenues are to boosted E250 million by reducing
exemptions for owner-occupied dwellings.
VAT revenues are to increase by E410 million by reducing exemptions
and shifting goods and services from the reduced and intermediate VAT
tax rates to higher ones.
Excise tax revenues are to rise by E250 million in 2012 by hikes on
car sales and tobacco and indexing excise taxes to core inflation.
E175 million in revenues are targeted in 2012 by attacking evasion
and fraud.
Such measures are to be extended or “deepened” in 2013 for savings
of E500 million in central administrations, E175 million in schools,
E100 million in public health benefits, E375 million in the public
health sector, E175 million in transfers to local governments, E175
million in public companies and E350 million in capital expenditures.
Higher revenues in 2013 are to come from E150 million in corporate
taxes, E175 million in income taxes, E150 million in social transfers
and E150 million in excise taxes.
To maintain liquidity in the banking sector, the government is
authorized to issue guaranteed bank bonds for to E35 billion.
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