"Tax amnesty" initiatives and public deficit in Portugal

A short post about a specific Portuguese subject: The very recent "tax pardon" that made so many happy national headlines (I will link a single example, but I'm sure all my Portuguese friends saw many others), since it surpassed expectations.

Some quick specific points:

The overall amount of taxes paid under this most recent "tax amnesty" was 1253 million euros, well above the 700 millions that the government had expected.

Those 1253 million  will lower the Portuguese 2013 public deficit by about 0.7% of the GDP. This in turn will allow the government to attain (and even beat!) the 2013 public deficit of 5.5% of the GDP that was accepted by the troika (the financial rescue group that integrates the IMF, the ECB and the EU itself).

Of course, those 5.5%, were a recent upward revision of an already upward revised prediction of 4.5%, from a year ago. But what does that matter? Everybody is happy, since it seems that the most recent official deficit target will be beaten.

Now, for the reason of this post:
This was not a real tax amnesty (the direct translation of the Portuguese expression is more colorful: "fiscal pardon", since the original is "perdão fiscal").
This was just a time window during which the families and companies that had to pay tax debts (mostly already identified and in the process of being collected), could pay those debts with a reduction of the fines and interest that would ordinarily be applicable.
As such, this merely anticipated (to the last 2 months of 2013) the collection of tax debts that would normally be collected (with some additional fines and interest, now forfeited) during the next few months.
At most, this scheme may have collected a very limited proportion of debts from entities that some months from now could have gone bankrupt, and end up not paying those debts. But that proportion was certainly not relevant, since companies going bankrupt in short order probably would not have now the funds to pay the debts upfront and, anyway, the Portuguese bankruptcy laws place the State (specifically, the tax and "social contribution" authorities) at the top of liquidation precedence.

So, in short, this scheme just anticipated already expected tax collection, and just saved the last revision of the 2013 deficit at the cost of worse forward deficits!


Note:
To contrast this with a real tax amnesty (or "fiscal pardon"), in Portugal, we don't need to go back many years... The last one was in 2012!

Quoting (in Portuguese) from one of many possible sources:

Regime Especial de Regularização Tributária (RERT III) - O RERT III é um regime excecional de regularização tributária, previsto na Lei do Orçamento do Estado de 2012 e regulamentado pela Portaria n.º 17-A/2012, de 19/01 para declaração de elementos patrimoniais não localizados em Portugal em 31/12/2010, cujos rendimentos correspondentes não tenham sido declarados à Autoridade Tributária, à semelhança do que sucedeu aquando do "Orçamento retificativo" de 2005 (RERT I) e da Lei do Orçamento de Estado para 2010 (RERT II).

Beneficiários: Pessoas singulares e pessoas coletivas que possuam elementos patrimoniais que não se encontravam em território português em 31/12/2010, e que consistam em depósitos, certificados de depósitos, partes de capital, valores mobiliários e outros instrumentos financeiros, incluindo apólices de seguros do ramo «Vida» ligados a fundos de investimento de capitalização do ramo «Vida».
 

This example includes a real amnesty in terms of forgiving past possible unpaid taxes, and no fines, nor criminal charges for those that followed the amnesty rules, and declared and paid a specified proportion of previously undeclared assets detained abroad (7.5%, in RERT III).
As such, in this case, an initial "declaration" fee was collected (a fee that otherwise would not be collected) and significant assets entered the taxation system, to pay ordinary taxes going forward (taxes that otherwise would not be collected in the future, since they will result from assets that without this amnesty would remain unknown by the tax authorities).

This second example, from 2012 (and note, from the citation above, that it followed similar amnesties in 2010 and 2015...), represents something that may be unfair for those previously paying all the legislated taxes, but that effectively adds both immediate and future tax income to the State.

The 2013 "fiscal pardon" merely anticipates tax income, at the cost of reduced tax income in the (near) future.
It was very successful, but it was merely another contortion to achieve a (short-term) delay in the final recognition of a dismal fact:  The Portuguese political rulers are not able to implement real deficit reduction.  In fact, they don't even desire that to happen, since they can't bear the thought of a reduction in the dimension and strength of the State.  All their efforts are focused on disguising the country realities, so that the Troika (now) and the markets (hopefully soon) will go on lending for a little while longer...