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PCP Insists on 10.5% Tax on Corporate Net Income to Fund Social Security | Parliament

Cast by the PSD, the PS and the CDS two years ago, the proposal of the Communists to create an additional contribution of 10.5% to Social Security on the most profitable companies will come back to Parliament. And at a time when Social Security’s balance fell by $ 1,813 million in the first half of the year due to the pandemic, the PCP bench believes that there is now more openness among Socialists to discuss the issue.

The PCP bill which will be submitted on Monday and to which the PUBLIC has had access recovers practically all the argumentation and the text of the 2018 diploma. The intention is to create a new form of diversification of the sources of financing of Social Security.

Despite the diploma already presenting all the form of calculation for the identification of the contribution to be paid on the so-called net added value, the Communist deputy Diana Ferreira affirms that it is not possible to estimate the amount that could enter the social security funds. But he maintains that it would be a measure which “creates a criterion of equity between companies” concerning the contributions they pay as employers.

“Initially, it will seek the wealth created by knowledge-intensive companies, with high turnover and profits but with fewer workers,” as is the case in finance and technology. While this could even relieve labor-intensive companies with a lower profit / value ratio invoiced per worker, as is the case, for example, in the metal, textile or footwear industry , describes Diana Ferreira. In short: the more profits and fewer workers, the more a business will be targeted by this new rate.

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This new contribution would not be calculated directly on the net added value (net profits, calculated after all the tax obligations and investment reserves of the company), but through a formula that takes into account the contributions that each company already makes. Social security as an employer on wages, describes MP Diana Ferreira.

Companies continue to pay monthly social security contributions to employers on all wages and salaries at the rate of 23.75%, as well as those of workers at the rate of 11%. The following year, with data from the tax administration, social security calculates the NPV of each company and applies a rate of 10.5%. If the sum of the normal employer contributions (those on wages and salaries) per year is greater than the amount resulting from this rate of 10.5%, the company will no longer have to pay to Social Security. However, if the sum is less than this amount, the company will have to pay Social Security the missing difference up to the amount obtained when calculating the 10.5% of the VAL rate.

Diana Ferreira underlines that this should only be one more contribution to the diversification of sources of financing for Social Security, to which must be added the enhancement of wages and the fight against precariousness (which brings more income) and unemployment (which reduces expenses)), as well as fraud. And a reassessment of existing TSU exemptions and reductions should be carried out. The diversification of funding was one of the issues set out in the common political position between the PCP, the PS and the government signed in November 2015. Although at the time they assumed that there was “convergence” in the objective, the legislator ended without measures.

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