Stalinism and Social Market Economy
Investing to provide housing for Portuguese families is one of the most used political banners during periods of the electoral campaign.
And it is in fact a fundamental issue, if implemented properly, it simultaneously promotes three objectives:
–Fosters as savings, and their effective application, namely by the middle classes;
– Promotion of employment in a set of relevant economic activities;
–Contributes to social cohesion by improving the living conditions of families.
Thus, for a housing policy to be successful, it is enough to create the conditions for the social market economy to function in a balanced and effective manner.
Unfortunately the ”gimmick” governments introduced two legislative measures that only harmed housing investment:
– Create a new tax, an addition to the IMI known as the Mortágua tax, which penalizes in an incomprehensible way those who invest to provide Portuguese families with a house.
While exempting from this confiscatory tax those who invest, for example, in alternating bars…
It is hard to imagine greater social insensitivity than what this tax represents!
–They blocked social support to tenants with incomes prior to 1990, of very low values, preventing them from being applied as social incomes defined by the Law of 2012.
By massacring real estate investors, forcing them to continue to receive only very low rents of 180 euros for a T4 in Lisbon’s Avenidas Novas, the ”gimmick” signals to all future investors, national and foreign, that the Government is ready to destroy the Social Market Economy out of mere ideological prejudice.
These two laws thus created a “neo-Stalinism” in housing policy in Portugal, which the government then tried to camouflage in a completely inconsequential and even absurd way.
In fact, later on to create so-called incentive programs for investment in housing “promising reductions in IMI, IRS and VAT” to potential investors, while investors with frozen rents far below “previous prices” are massacred with the Mortágua Tax now announced, it is a disaster that only harms access to housing.
Or does the Government think that someone in its perfect judges will believe that these so-called “Incentive Programs” will be communicated in good faith within five or ten years, when it is the Government itself that currently prevents those who currently have homes leased from receiving social income for them?
The social market economy is based on mutual trust, efficiency and flexibility.
It is perfectly understandable that the Government has put forward a coherent fiscal policy that preferentially encourages those who invest in housing to provide families with contracts of five years or more, and values considered socially balanced.
But all that are useless bureaucratic burdens, which only increase the weight and cost of the State machine, only lead to collective impoverishment.
On the contrary, what is needed is to restore investor confidence in housing policies.
And the absolutely essential first step in this regard is to abolish the AIMI, the infamous Mortágua tax, at least in relation to all properties that are rented for periods exceeding one year!
And the simplest and most bureaucratic way to encourage more renting is to define the maximum rent limits for various types of apartments in the metropolitan areas of Lisbon and Porto that can have access to both IMI and IRS / IRC deductions, and for contracts with a duration of five years or more.
As the Tax Authority has direct access to the leases, the respective analysis will be automatic without having to resort to the cumbersome bureaucratic systems of the “Affordable Rents” and “Secure Rents” programs. And no investor is interested in having the State interfere in the management of their assets, as happens in the “hidden neo-Stalinism” underlying these Programs.
It is certain that, with investor confidence re-established with the elimination of the two confiscatory instruments behind the court, and with these additional incentives, the housing supply would increase in large metropolitan areas, and the market would naturally adjust downwards for the benefit of families.
This is the great potential of the “invisible hand” of the social market economy.
And that is what a Quality Democracy must provide the Portuguese.
Full Professor at Instituto Superior Técnico
Signer of the manifesto For a Quality Democracy