Calculating the cost of changes to the IRS is a “mission impossible to accomplish” in two weeks, claims UTAO

The Technical Budget Support Unit (UTAO) considers it “impossible” to assess the cost of each of the seven proposals to change the IRS Code presented by the parties by May 23. The deadline given for calculating the cost of reducing marginal income tax rates was considered impossible to meet by the UTAO coordinator, Rui Baleiras, in a letter sent to the deputies of the Budget, Finance and Public Administration Commission (COFAP).

COFAP deputies validated, on Wednesday, May 8, a request that asks UTAO to assess the budgetary impact of the parties’ proposed amendments to the IRS within 15 days. All parties, with the exception of the PCP, approved the PS’s request.

Less than a day later, UTAO’s response arrived: “After immediately consulting the seven documents above, and with all due respect to the members of COFAP, UTAO concludes that it is faced with a mission that is impossible to achieve”, says the missive to which the Express had access. “There are three reasons behind this conclusion: deadline, information means and opportunity costs”, he details.

“Regardless of the other reasons, a professionally serious budget forecasting exercise on just any of the legislative proposals does not fit into 15 consecutive working days (weekends included). COFAP asks for the evaluation of seven proposals in two weeks”, can be read in the letter.

It is a short period of time, given the technical complexity of the topic, which requires, among other steps, data collection and processing and the final writing of the report, he argues. “Even if UTAO stopped all other production and fully dedicated its five human resources to this work (four analysts and the coordinator) for 15 consecutive days, would never be able to deliver a sufficiently rigorous technical assessment so as not to mislead political discussions of legislative initiatives in committee or plenary”.

Data relating to the most recent IRS campaigns would also be necessary, which, for now, are prohibited from UTAO as it does not have direct access to the Tax and Customs Authority (AT) databases. And even if it had, “the time lag between the most recent IRS campaign (with microdata processed by AT) and the subsequent changes to the IRS code that Parliament introduced with effects on settlements in 2023 and 2024” would prevent a rigorous calculation, says UTAO. The parliamentary technical unit therefore claims that the lack of very detailed data relating to last year’s and current year’s income prevents the calculation of the “numerical basis against which to compare the effects on the collection of the seven proposals that the applicant seeks”.

In other words: only by calculating the amounts paid resulting from the recent changes to the IRS law that came into force in 2023 and 2024 can a reliable forecast be made of the future impact on the State’s coffers. “The margin of error in calculating the base will plausibly be in the order of many hundreds of millions of euros”predict.

There is also the issue of what is called opportunity costs, that is, the time spent analyzing these proposals to the detriment of others: “UTAO’s human resources are scarce and its responsibilities are large and diverse. Even if time and informational constraints did not exist, UTAO would have to confront parliamentary political power with the production that would cease to exist to displace all installed capacity to carry out this separate study, not foreseen in its activity plan”.

In addition to the “invisible work of updating and maintaining many databases”, UTAO professionals have to “treat these databases and monitor, through regular budget execution reports in national accounting and public accounting, developments in the accounts public” in order to be able to evaluate the State Budget for 2025. “Not doing so is like a professional football team playing official games without first training”illustrates.

Assessing the cost of the proposals would also delay the analysis of other requests, such as the one relating to the controversial budget execution for the first quarter, and the study of the expected expenditure on recovering the Civil Service’s career years, both of which are the responsibility of the institution, he claims : “This full allocation of the installed capacity to execute it would prevent the publication of the analysis of the budget execution for the first quarter of 2024 in public accounting and further postpone the completion of the separate study, also requested by the 5th Permanent Commission, on salary progressions for non-higher education teachers and workers in other professional careers”.