IRC Reduction: Between Possible and Necessary

The government's recent announcement of a gradual reduction in the corporate income tax rate —to 19% in 2026, 18% in 2027, and 17% in 2028—undoubtedly represents a step in the right direction. For small and medium-sized enterprises (SMEs), the reduction to 15% on the first €50,000 of taxable profit, starting in 2026, is also positive. In a country where the high tax burden continues to be one of the main obstacles to competitiveness and attracting investment, these measures should be seen as encouraging signs. In a business community like Portugal, largely composed of SMEs, it is legitimate to expect that this decision will have a significant impact.

However, these are still tentative advances compared to the ambition Portugal needs to assume to establish itself as a competitive and attractive destination on the international scene. In this context, two fundamental questions arise: why not go further fiscally? And why not broaden the scope of measures, creating a true "package" of actions that more significantly promotes competitiveness?

The 17% target for 2028 is a step forward, but it falls far short of the long-promised "fiscal shock." Some of the countries with which Portugal competes directly in attracting foreign investment have lower tax burdens, more robust incentive policies, and lower contextual costs. The government estimates that this measure will have a budgetary cost of around one billion euros, to be offset by economic growth and the containment of primary current expenditure. This estimate is plausible, but only if accompanied by profound structural reforms and a genuine commitment to improving the business environment.

The urgency of acting more decisively is also confirmed by business owners themselves. In the most recent survey by the AEP (Portuguese Business Association), 94% of respondents considered that reducing the tax burden on companies should be one of the government's top priorities. This is a clear sign that the business community is aligned on the need to create a tax framework more favorable to investment, competitiveness, and economic growth.

However, reducing corporate income tax alone is not enough. The challenges faced by Portuguese companies go far beyond taxation. It is imperative to simplify bureaucracy, promote economies of scale, support internationalization—especially in an increasingly adverse geoeconomic context—and eliminate the multiple contextual costs that affect companies' day-to-day operations.

The labor shortage is another critical problem, which requires structured responses in immigration policies and greater flexibility in the labor market—without confusing flexibility with precariousness.

The current international context, marked by geopolitical instability, market volatility, the European Union's sustainability demands, and growing political uncertainty, hinders investment decisions and hinders internationalization. In this scenario, it seems clear to me that a reduction in the tax burden—naturally adjusted to its size—could be decisive in reversing this trend, making Portugal more attractive and competitive.

Therefore, this corporate income tax reduction should be seen as part of a broader effort to reposition Portugal in the global economy. It is essential that the country convey a clear message: we want to support our companies, allowing them to reinvest their earnings to become more competitive. At the same time, we must affirm that we are open to investment, prepared to grow, and truly committed to the structural reforms our economy demands. A country that values its companies and offers them real conditions to compete—at home and abroad.

However, this commitment could, and should, be more ambitious. Not out of ideological impulse, but out of an urgent strategic necessity. The 15% corporate income tax target shouldn't apply only to SMEs, nor to just a fraction of profits. This should be the goal for all companies, within a shorter timeframe. That would be a true fiscal shock, with a lasting impact on economic growth, the creation of skilled jobs, and the structural transformation of the Portuguese economy.

To accept anything less is to resign ourselves to managing what is possible, when what we really need is audacity, vision, and courage to accelerate our economy and achieve true convergence with the most developed countries in Europe.

Still, I'll end as I began: although timid, this measure is a positive sign. It's encouraging to see that we're beginning, albeit gradually, to take the right path—toward an environment more favorable to economic growth and the valorization of our business community. Now, it remains to ensure that this is just the beginning of a broader, more consistent, and, above all, transformative effort.