Country Note: Three Emblematic Measures in Portuguese Business Taxation: A Preliminary Quantitative Appraisal

Abstract

This article evaluates, at a preliminary level and from a quantitative perspective, three measures influencing corporate income taxation in Portugal: the treatment of intangibles, efforts to promote investment; the creation of a simplified tax regime for micro-firms, to reduce compliance costs; and the limitation of financial expense deduction, to reduce leverage. Using aggregate tax data made available by the tax authorities, the article assesses the influence of these measures in terms of firms affected and the taxable income they increased or exempted. The simplified tax regime had a modest rate of success, given the small share of firms adopting it; the incentives to intangibles had a limited effect; and the limitation of financial expense deduction had a significant impact, given the leverage of many firms. The article presents empirical evidence of the consequences of significant corporate tax measures. A posteriori quantitative assessments of tax changes are useful for policy makers, taxpayers and tax professionals