Local Finance in Portugal: Recent Proposals and Consequences for Urban Management

Abstract

Recent changes in the local finance system in Portugal are analysed as is the impact of present government proposals. A brief description of local finance in Portugal reveals a system structured into three main components, showing an increase in local taxes and a relative decrease in grants since 1979. Taxes on immovable property are dominant as are unconditional block grants in state budget transfers. Another characteristic is a clear geographical differentiation in most municipal revenue components. The importance of local government expenditure in relation to total government expenditure is one of the lowest in Europe. The reform in preparation will result in an increase in local government expenditure as a proportion of total public expenditure, the percentage being expected to double to 15%, representing an increase in the overall weight given to local taxes and a diversification of taxes. In the second part of the paper the author discusses the impact this will have on the financing of municipal planning and urbanisation, with the issue of equity a central point.

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