President Marcelo Rebelo de Sousa declared the dissolution of the Assembly of the Republic, scheduling elections for March 10, 2024.
Initially, it seemed that due to the resignation of Prime Minister António Costa following police raids on his official residence as part of a corruption probe. The legislative initiative to terminate the Non-Habitual Resident (NHR) preferential tax regime will fall flat and will not pass this year.
However, the UTAO (Technical Budget Support Unit) issued a technical note clarifying that, since the budget law was approved in “the generality,” it no longer qualifies as a proposed law under Article 167. Instead, the UTAO contends that the bill has acquired the nature of a Decree of the Assembly of the Republic, ensuring continuity in the legislative process. Consequently, a final global vote on the state budget law for 2024, including the NHR termination proposal, is now set for November 29th.
Beyond the NHR regime, the approval of the State Budget holds significant implications for Portugal. Failure to pass the law would result in the immediate loss of access to European funds from the Recovery and Resilience Plan.
Despite concerns about the constitutionality of this interpretation, President Marcelo Rebelo de Sousa seems inclined to rely on the UTAO’s understanding to maintain the 2024 State Budget Law proposal. The vote on November 29th is crucial to avoid the loss of EU funds.
The outcome of this vote is uncertain, given the divisions within the Socialist Party stemming from recent revelations. While the party holds a parliamentary majority, Pedro Nuno Santos, a potential successor to Costa, has deviated from the party line. The corruption scandal involving Costa’s faction may prompt some in the Socialist Party to seek changes to the State Budget Law.
Considering the uncertainty about Portugal’s future government, parties may enter into a “pact regime” to support the budget law regardless of the election outcome. However, constitutionalists have criticized the President’s move as constitutionally questionable, suggesting a disregard for the Constitution’s defense.
This situation places the country in a complex state, with a government embroiled in a corruption scandal and a prime minister who has resigned while under investigation. Despite these challenges, the government will continue functioning for several more months. As we approach the 50th anniversary of democratic rule, our institutions face widespread discredit, not only domestically but also internationally.
The Parliamentary Commissions are still deliberating the bill’s wording. By the time of the final vote on November 29th, the bill may or may not include provisions to end the NHR.
Thus, Portuguese political decisions regarding tax and immigration policy remain uncertain until officially confirmed.