2020-05-28
Guilherme Dray

Published on ECO News.

The American have re-innovated again, now during the pandemic crisis.

Since the enactment of the Civil Rights Act of 1964, proposed by President J.F. Kennedy and signed by President Lyndon Johnson, Americans have been innovators in terms of equality and non-discrimination. Europe owes them the concept of disparate impact, as well as criteria for verifying whether a distinctive practice can be fully accepted without being discriminatory. In this field, the use of good faith is highlighted, through the BFOQ – Bona fide occupational qualification criterion. That is to say: if the difference in treatment is made in good faith and grounded on the type of activity to be carried out and the characteristics of the job to be filled, it can be accepted. Not going through this sieve, it is intolerable.

The Americans have re-innovated again, now during the pandemic crisis.

On February 6, 2020, the U.S. Court of Appeals for the Third Circuit reversed a district court’s preliminary injunction that prohibited the City of Philadelphia from enforcing its ban on employers asking for job applicants’ salary history. The goal of the Philadelphia Wage Equity Ordinance is to tackle the wage gap for women and people of color. The Court stated that the prohibition of employers from asking about the job seekers´ wage history and setting salaries based on this history is constitutional.

In the Greater Philadelphia Chamber of Commerce v. City of Philadelphia case, the Court found that the Wage Equity Ordinance does not violate the freedom of expression provided for in the 1st Constitutional Amendment, and that the ordinance is an important mechanism to combat wage discrimination.

Both the lawmaker and the Court concluded that the chance given to the employer to raise questions about the wage past of job seekers was a mechanism to perpetuate wage differences that affect mainly women, particularly Afro-Americans and Latinos. By asking to candidates about their wage history and relying on that history to set a starting salary, employers felt legitimized to maintain such a status quo.

By banning such questions, the law puts an end to this practice.

According to the Court, wage growth and wage decisions should only be based on qualifications and job requirements, thus the importance of this law.

This law follows a long tradition against gender pay gap.

In the United States of America (US), the data points that for every $1 received by men, women who do the same job receive only 80 cents. The gap tends to worsen over the years, as percentage increases are made based on unequal starting salaries.

The first law aiming at tackle the gender pay gap was the Equal Pay Act (EPA) of 1963, which prohibits any form of wage discrimination. The EPA, however, acknowledges wage differences whenever the employer requests an objective reason. And that was the problem, since the wage past had been presented as an “objective reason” to justify different salaries between men and women.

That’s why the State of Philadelphia enacted that ordinance in 2017, which now was deemed constitutional.

In Portugal, the principle of equal salary for equal work is enshrined in article 59 of the Portuguese Constitution and articles 31st and 270th of the Labor Code. But here too, the problem persists, with a gap around 14.4% between what men and women receive for the same type of work.

That is why other legislative solutions have also been tried in Portugal to combat this problem.

In 2018, Law No 60/2018 was adopted, according to which companies must ensure that there is a transparent remuneration policy, and one may predict the enactment of new laws for this purpose.

But this question of the salary past has never been raised.

Philadelphia law and the U.S. court’s recent decision can therefore bring new winds of change in this area.

In any case, it is important not to forget the essentials: more than a legal obligation, retributive equality is an ethical and social justice imperative.

The impulse must therefore go above all from companies in the name of their social responsibility.

2020-05-13
Guilherme Dray

Published on ECO News

The protection of public health requires increased care on resume to work that may limit the right to privacy.

The pandemic crisis and the return to work confront the right to privacy and the protection of public health.

The right to privacy means that there is an inviolable sphere of its own, which must be protected from the curiosity of another. Everything that concerns our family life, sexual, affective and state of health, must be preserved. No one can access such information, and no one should disclose it. This rule is enshrined at the Portuguese legal framework – articles 26 of the Constitution; 80 of the Civil Code; and 16, 17 and 19 of the Labor Code.

The protection of public health, however, requires increased care on resume to work that may limit the right to privacy.

Worldwide, special rules have been created to prepare workers and employers for the COVID-19 virus.

In the United States of America, for example, in addition to the Occupational Safety and Health Act, which states that employers must ensure work in safe and healthy conditions, new guidelines on COVID-19 have been published by state agencies, such as, the following:  Department of Labor (DOL), Center for Disease Control and Prevention (CDC) and Equal Opportunity Employment Commission  (EEOC). Basically, telework, the use of protective equipment, the distance between workers, and the refusal of working from those who show signs of contagion are recommended.

The same happens in Portugal.

In addition to the Legal Regime for Safety and Health at Work, which says that workers have the right to work in safe and healthy conditions, specific rules have been created on COVID-19.

The Decree-Law No. 20/2020, of May 1st, imposed the drafting of contingency plans and allowed body temperature control. The  ACT, in turn, has approved  new recommendations based on the use of protective equipment, the distancing of workers, and outdated working hours.

Article 13 C states that, in the current context and solely for reasons of protection of the health of the employee and third parties, body temperature measurements may be performed on workers for the purpose of access and permanence in the workplace. It is also said that this measurement does not prejudice the right to data protection, and it is forbidden to register it, unless the worker consents. If the temperature is higher than “normal”, the employee can be prevented from accessing to the workplace.

Essentially, this provision strikes a fair balance between the right to privacy and the safeguarding of public health. Public health justifies temperature measurement. The right to privacy and the fact that health data are sensitive, are protected by the prohibition of recording measurements.

But there are matters that have become ill-defined.

First, the law does not guarantee (as it should) the intermediation of a health professional. Obviously, we should have a doctor at the entrance of each undertaking to measure the workers ‘temperature, but the responsibility for the system should have been given to an occupational physician and the measurement performed only by a  professional subject to the obligation of professional secrecy. Let security contractors in outsourcing doing it, does not seem a good solution.

Secondly, the temperature from which the worker is prevented from working is not defined.

Thirdly, it is not clear whether the worker prevented from working continues (or does not) receiving his salary and who pays him.

Finally, we may have (unfortunately) constitutional problems.

On the one hand, because fundamental rights cannot be compressed without the Parliament authorization. (article165, 1, b), Portuguese Constitution). So, we may be facing an institutional unconstitutionality. On the other hand because the absence of a doctor’s intermediation can generate material unconstitutionality. In  the Judgment of the Constitutional Court n.º 306/2003, the Court declared the unconstitutionality of a rule of the Labor Code, precisely because it did not include the intermediation of a doctor. At the time, the Court held that the employer’s direct access to information relating to workers’ health violates the principle of banning excess restrictions on the fundamental right to reserve privacy.

In a nutshell: being understandable and justifiable, the body temperature measurement provided at the new article 13 C fails in the details.

The law fulfilled the hardest part, which was the justification for body measurement.

But failed in the details.

And the problem, as the people commonly says, is that “the devil is in the details.”

2020-04-28
Guilherme Dray

Published on ECO News.

Telework is of great importance to tackle outbreaks, which is why the Portuguese Government has decreed the obligation to adopt remote working during the covid-19 disease pandemic.

Finally, the telework.

Conceived in the 1970s by Jack Nilles to minimize the commuting in the United States of America, telework took a long time to spread.

In Portugal, it came up with the Labor Code of 2003.

At the time, I had the privilege of being part of the drafting committee of the Code and to drafting the provisions relating to teleworking. Alongside personality rights, telework was at the time innovative and not always well understood. It was even a laughingstock.

The strength of its advantages and the pandemic crisis we are experiencing ultimately, imposed it.

Teleworking brings several advantages.

For the worker, ensures the reduction of commuting, transportation and food expenses; better reconciliation of work and family life; easier demand for employment; and strengthens freedom of work.

As for the employer, it guarantees the reduction of operating costs in facilities and energy; the optimization of available spaces; the increase in the universe of staff recruitment; and greater resistance to external factors, such as strikes, acts of terrorism or natural calamities.

As far the whole communities, the advantages are even more clear: reduction in air pollution levels; decongestion in city centers; reducing disparities between urban and rural centres; and the creation of new jobs, particularly for people with physical disabilities.

Telework is also of great importance to tackle outbreaks, which is why the Portuguese Government, through Decree n.º 2-A/2020 of 20 March, has decreed the obligation to adopt remote working during the covid-19 disease pandemic, whenever the functions in question allow it.

Teleworking may, however, put in risk the privacy of the teleworker.

For this reason, the Portuguese Labor Code contains rules aimed at preventing this risk.

In the light of the Code, the employer must respect the worker’s privacy and the rest times of his family (art. 170). Where the telework is carried out at the worker’s home, any visits to the workplace should only be allowed to control of the work activity and can only be carried out between 9am and 7pm, with the assistance of the worker or the person indicated by him.

As a result of the massification of telework during the current pandemic, the National Data Protection Commission (“CNPD”) also clarified that the rule prohibiting the use of means of remote surveillance, in order to control worker performance, is fully applicable to telework. For this reason, technological solutions for remote control of worker performance are not allowed. For example,  software that logs the visited web pages, the location of the terminal in real time, captures the desktop image, observes and records when access to an application is initiated, controls the document you are working on, and records the time spent on each task, are prohibited. According to the CNPD, these tools collect excess personal data from workers. The work provided from home does not justify a greater compression of personality rights.

On the contrary, the CNPD considers it legitimate to record working time using technological solutions. Such solutions should, however, be limited to recording the start and end of work and the lunch break. Not having such tools, it is legitimate for the employer to fix the obligation to send e-mail, messaging or any other way that allows him to control working times.

The telework came, at last, to stay.

The last quarter of the 20th century announced it.

The current pandemic crisis has imposed it.

Society and the Law must now pay more attention to it to prevent this brave new world from becoming a violation of our privacy.

PS: it is true because I saw it. The Portuguese Employment State Agency (“ACT”) has asked a company to learn of the documentation regarding its Lay Off within 2(two!) days, with the warning that, not doing so, incurs in administrative offense and “in the crime of qualified disobedience”. The state of emergency justifies several things, but it cannot be an open door to the arrogance and arbitrariness of state inspectors. We must avoid Hayek’s “road to serfdom”.

During the second half of the 1900’s, several generations followed the entertaining holiday adventures of Enid Blyton’s Famous Five through the English and Welsh countryside. In each of the twenty-one novels, turned TV shows, the intrepid Julian, Dick, Anne and Georgina (George) – and their dog Timmy, get caught up in an adventure involving villains and lost treasures.

In the late 2010’s, for those following the Portuguese communications market it seemed that another novel of a famous five was unfolding. This novel involved a cast of five – the four mobile service providers with 98% of market share[1] and their watchdog[2] - and evolved around another five, the 5G, whose full name is the dry IMT-2020 standard.

This market novel, began with a public consultation held in March 2018, regarding the implementation of 5G and became the fighting ground of an unusually bitter dispute between the Regulator and key market players, with the latter accusing the first of failing to create adequate regulatory conditions for its roll out and the ANACOM claiming that it was following the schedule agreed at EU level.

This dispute eventually subsided when, in February 2020, ANACOM published a consultation on a draft regulation to a 5G spectrum auction[3].

 

The long story of a closed market

It may be said that this is the latest of a three-decade long string of spectrum licensing procedures in which the Regulator attempted to reshape the market by bringing new players. 

Throughout the 1990’s, the award of spectrum licences for mobile services, either mobile telephony, paging or trunking systems[4] even for fixed wireless services[5] became a key instrument to gradually open the market communications to new services and players.

These award procedures were essentially beauty contests that awarded fixed price licenses based on mostly qualitative criteria.

With the full liberalization of fixed services, fixed spectrum licenses became redundant and, in the mobile segments, the supremacy of GSM, fuelled by pre-paid services and market consolidation, led to the gradual phase out of less versatile technologies.

By the end of the decade, with the award of a third mobile spectrum licence, three large communications conglomerates emerged and solidified their position.

With the market still expanding, in the early 2000, ANACOM attempted to use the introduction of 3G to bring a new player by awarding a fourth licence, again using the traditional beauty contest system. This time however conditions had shifted and in the adverse international context of the burst of the telecom bubble, lack of technology availability and a far more belligerent market highlighted the frailties of both the Regulator and the regulatory framework and the Portuguese new entrant suffered the same fate as most its 3G European new ventures – was shut down without a single customer.

The aftermath of this process virtually dictated the end of ANACOM’s attempts to reshape the market via the award of spectrum for nearly two decades.

In 2011, with the country in the middle of the sovereign debt crisis and in a recession-stricken market, a 4G auction was held. This time, it was meant to serve as little more than a way for an income starved State to increase fiscal revenues and alleviate the enormous financial burden it was facing: the auction started and ended without virtually no bids made above the reserve price.

We would have to wait for the second half of the decade for the Portuguese market to settle and show signs of change.

The Portuguese mobile markets share most of the characteristics of its European counterparts: there are decreasing growth rates as they reach near saturation in most segments, there is erosion of the traditional revenue streams caused by OTT providers, while, at the same time, there are particularities that should be noted, particularly for newcomers.

In the second half of the 2010 decade, two key events reshaped the market, the first was the takeover by Altice of the former incumbent PT Group, who was dragged into near bankruptcy by the collapse of its major shareholders, and the second, the merger between Optimus/ZON merger (i.e., the merger of the third mobile operator and the largest cable operator, who also had a small MVNO operation), creating the NOS group.

While battling a long recession throughout most of the decade, Portuguese operators were forced to look for innovative ways to counter the erosion of their traditional revenue base and the saturation of the market. In order to do so, they used a particular feature of the Portuguese market: the fact that all key players are horizontally integrated, i.e., they all own fixed and mobile networks, thus allowing them to bundle services and capturing revenue by diversifying their offer across market segments.

This strategy proved successful as, according to ANACOM, in 4Q2019, virtually all households (98,8%) subscribed to a multiple play bundle (double play or higher), more significant still is the fact that quadruple or quintuple play (i.e. an integrated offer of fixed telephony, fixed internet, television, mobile telephony and mobile internet services) account for nearly half of these bundles (48,8%).

In such a scenario, there aren’t many incentives for new entrants, which explains why MVNO’s account for only 1,8% of mobile voice traffic, and why, of the two major MVNO’s, only one is a stand-alone operation while the other is essential mobile arm of a triple play fixed operator.

Current 4G (and 4G+, or LTE) networks represent a considerable upgrade, after all, they are roughly 500 times faster than 3G, and are able to support high-definition mobile video streaming, video conferencing and much more. When a device is moving, as when one is walking with one’s phone or is in a car, the top speed can be 10s of mbps, and when the device is stationary, it can be 100s of mbps.

In Portugal, given both the market characteristics and the economic context mentioned above, 4G rollout became virtually unnoticed and ended up having only a marginal impact in the whole market structure.

The excessive market concentration has been voiced by several entities. As far back as 2012, the Competition Authority wrote that in comparison with its previous reports, the Portuguese mobile communications market “maintained the level of concentration as measured by the market share of the two major providers (…), who recorded a combined market share of 83%, close to the highest of the EU and far above its average. (…) This high concentration level is fostered by the marginal impact of MVNO, who have a market share of only 1,4%, by a low level of consumer mobility between operators and increased network effects”.[6]

Although this assessment was written almost a decade ago it could have been written today.

 

New winds…

Over the last two years, however, in an unprecedented change of mood, ANACOM not only voiced its displeasure with the status quo but also signalled its intention of actively intervening in the market in order to change its structure. As expected, these assertions were met with fierce resistance and disbelief by operators and was followed by an unprecedented vocal dispute between operators and the Regulator.

Considering that the technical features of 5G make it much more than a simple evolution of existing standards, it is not surprising that ANACOM is once again trying to use the spectrum award procedure for the new technology as a catalyst to foster a change in the market structure.

This explains the reason why for the first time in 20 years, ANACOM is actively pursuing the appearance of new players by providing clear incentives for new entrants. If in the 3G spectrum award procedure the sole incentive was a fourth license, in the current 5G auction draft regulation these incentives for new entrants only range from (i) direct discounts and deferred spectrum payments, to (ii) creating for incumbents the obligation to negotiate fair MVNO and national roaming and, (iii) in an attempt to prevent incumbents from buying off new competitors, a two year waiting period for spectrum resale.

In addition to the favourable spectrum award conditions of the 5G proposed regulation, new entrants will also be able from the externalities of the Government’s digital transition policies, a complete set of plans put forward to accelerate the use of electronic platforms throughout society as a whole.

As mentioned above, Portugal’s electronic communications networks are on par with the country’s EU partners, e.g., in 2019, more than 4/5 households had broadband access, while mobile broadband penetration rose to 84,1%, which compares reasonably well with the EU average.

From 2010 to 2019, the year-on-year growth rate of broadband penetration as a whole averaged 5,1% and currently nearly 99,6% of students and people who have completed secondary and tertiary education are internet users (96,9% and 98,7% respectively).[7]

Nevertheless, the availability of a good infrastructure evidenced by the investment made through the last decades hide a less favourable picture. In fact, at the same time as penetration rates grow steadily toward saturation only 76.2% of the whole resident population aged 16 to 74 (roughly the country’s active population) was an internet user and, more worryingly, only 38,7% used e-commerce.

Interestingly, almost half of the users limited their Internet activities, such as the purchase of products or services, internet banking or the ones implying the provision of personal data, due to security concerns. We mention this point because, considering that Portuguese Internet is not particularly more dangerous than anywhere else in Europe[8], security concerns do not justify per se why such high percentage of users refrain from making a wider use of digital services.

At the same time, we do not consider also that these concerns are mere wrong perception of reality either, these worries are real. However, we consider them as the consequence, rather than the cause, of the phenomenon: this is, arguably, a simple case of distrust of the unknown.

In fact, there is an ample perception that the Achilles heel of “digital Portugal” is a mix of digital illiteracy and resistance to change, worsened by an ageing and less educated population and a general lack of actual incentives to use electronic services.

For these reasons, over the last years of the 2010/2019 decade, successive Governments insisted on a series of initiatives to enhance the country’s digitalization. These initiatives targeted not only public administration, but also the private sector, both for individuals and businesses.

The latest example occurred, on March 5th, 2020, the Government proposed an “Action Plan for Digital Transition”, which, according to its promoters is a cross-sector, multi-channel, ambitious, pragmatic, comprehensive and quantifiable plan to make Portugal as an international reference using the benchmark of the world’s best practices.

Therefore, with a Regulator keen on welcoming new players, a technology available to cater for new services and a Government willing to expand the usage of digital services to the whole population, 5G would be certainly be a natural and critical part of these plans.

It seemed that like the in Blyton’s famous five adventure, this “famous 5G” headed for a happy ending.

 

Until, suddenly, in the ides of March…

Unfortunately, less than a week after the presentation of this plan and while the consultation for the 5G auction was undergoing, the COVID19 pandemic made a dramatic appearance.

With the country in virtually complete lockdown, with operators trying to cope with the limitation on movements and, on the other hand, the additional strain on their networks caused by millions being suddenly forced to use their home communications for virtually every aspect of their lives, ANACOM, regrettably but understandably, decided to suspend the auction consultation until the end of the State of Emergency.

It is obvious that the short and midterm effects of the pandemic in the Portuguese economy (and in the worlds for that matter[9]) are as unknown as they are expected to be dire.

In Portugal, in the weeks from 6 to 10 April 2020[10], i.e., three weeks into the lockdown, a survey by Statistics Portugal confirms that nearly 69,3% of companies in the information and communications sectors expect a severe reduction in company turnover.

This percentage is naturally higher in other sectors that are currently suffering the greatest impacts, such as the accommodation and food services, as well as non-essential retail.

Nonetheless, when looking at the whole universe of businesses, only 2% of the companies declared they were definitively closed, i.e., the vast majority of businesses 98% remain in full or partial operation. More importantly, only 26% of the companies reported a reduction of more than 50% in the number of persons employed effectively working.

It is natural that the number of bankruptcies and liquidations will increase in the short term, as well as the unemployment rate, however, considering the severity of the lockdown measures it is a significant sign of hope that so many remain in operation.

Regarding the communications market, however, in the same period, ANACOM[11] reported an average growth of 1,5% in relation to the previous week, with the decrease of mobile voice and data (of respectively -1% and -7%) compensated by an increase in fixed voice and data traffic (respectively 3% and 7%).

While the impact of the crisis is unknown and volatility is expected in the coming quarters, one trend is emerging when discussing the post lockdown stage[12]: remote work in all roles that do not require physical presence and the usage of webinars and remote training (e.g., for schools and universities but also for in company training) will be greatly encouraged.

Moreover, the forced shutdown of most services open to the public have forced a significant number of persons to use overnight digital services, which they probably would never do otherwise, thus expanding the usage of digital platforms to unprecedented levels.

It may be possible that remote work, remote teaching and a population suddenly familiar with digital services, may provide in the near future the increased demand for electronic communications networks that the market will have to cater. How and when they will do it remains to be seen.

 

For more about the incoming Portuguese 5G auction read our paper on it here.



[1] Altice, Vodafone, NOS and Nowo (the latter operating solely as an MVNO).

[2] ANACOM.

[3] The consultation may be found here.

[4] Along with licenses awarded to the incumbent (TMN and Telemensagem), a 2G licence was awarded to Telecel, (now Vodafone), with licenses for paging (awarded to Telechamada and Contactel) and trunking (Radiomovel – it should be noted that these frequencies are still licensed to Dense Air).

[5] The award procedure, with the frequencies to be licensed may be found here (in Portuguese only).

[6] AdC – Competition Authority, Electronic Communications and Media Report, 2012 (our translation, the whole document may be retrieved here).

[7] See Statistics Portugal, Information and knowledge society – household survey, 2019 (you may find the full document here).

[8] Over the last decade, there were on average 611 reported cases of computer crime. It should be noted that this definition is very broad as it includes all cybercrime but also unlawful interception of communications and even copyright infringement (such as illegal copy of protected material). See the Homeland Security Annual Report, 2018 (the full report in Portuguese only may be found here).

[9] See, e.g., the IMF webpage here or the OECD perspective here.

[10] Statistics Portugal and Bank of Portugal Fast and Exceptional Enterprise Survey (COVID-IREE), a monitoring survey on the impact of the pandemic on enterprises (see full document here).

[11] See ANACOM data here  (in Portuguese).

[12] See, e.g., the Mckinsey featured report Europe needs to prepare now to get back to work—safely (full report here).

2020-03-05
Guilherme Dray

The last century brought collective bargaining as an instrument of social peace and dignification of work. The 21st century  can establish it as a mechanism of social responsibility for companies.

Since the middle of the last century, Western countries assumed  that  collective bargaining promotes the improvement of working conditions and is a factor of economic competitiveness.

The United States of America (US) played a pioneering role in this area, from the moment when they realized that without collective bargaining the labor riots would paralyze the economy. It was in this context that in 1935 the  National Labor Relations Act  (NLRA) was approved, which enshrined the right to collective bargaining  (Sec. 7. [§ 157.]). The countries of continental Europe followed. In Portugal, the State expressly assumes its intention to promote collective bargaining  and the Labor Code  (LC) states that it collective contracts should apply to as many workers and employers as possible  (art. 485).

In both cases, collective bargaining, more than a right to bargain, came to be seen as a duty to do it. In the US,  the NLRA  establishes the obligation to bargain collectively; in Portugal, the LC determines that the recipient of a collective  agreement proposal has a duty to respond with a view to initiating negotiations. In both countries, the law  does not impose as a final result the conclusion of a collective agreement, but requires the parties  to negotiate it and to do so in good faith.

In the light of these rules, collective bargaining has enhanced over the years the  self-regulation of interests in various matters – organization of working time, retributive policies, job positions and career promotions, right to rest, or the exercise of trade union activities within the corporations.

The second decade of 21st century seems to bring a new dynamic and a new challenge to collective bargaining: to contribute to the promotion of the common good.

Once again, it is a movement that started in the US.

In the context of corporate social responsibility, civil society and trade unions have joined forces and created a new movement concept that has been imposing: the  BCG  -  Bargaining  for  the  Common  Good.

It is about assuming that more than benefiting workers with salaries and promotions, the collective labor agreement can bring benefits for other stakeholders, such as the  local community,  the most disadvantaged, and the environment. BCG bring a set of demands that benefit not just the bargaining unit, but also the wider community as a whole, expanding the scope of bargaining beyond wages and benefits. There are several examples of practices adopted by companies that have joined this movement: new equal pay policies;  scholarships for students; requalification  of  school centers; financing of municipal works; environmentally friendly practices; volunteering actions; real estate assets for rentals at social prices; support for ethnic minorities, among others.

The future of collective bargaining is here – to combine efforts between companies, unions and civil society, to seek benefits for the whole community and not just for unions and workers.

MV Conversations with João de Macedo Vitorino

With Lisbon touted as one of Europe’s Top 5 Start-Up Hubs, MV Conversations looks at the realities of Portugal’s Start-Up ecosystem and its true potential going forwards.

‘Start-up’ is a recent buzzword in Portugal. For the past few years, from the Government to the co-working spaces, people are embracing entrepreneurism and working towards living up to the hype of being one of the most promising innovation ecosystems in the world.

With Lisbon having recently hosted the Web Summit for the 4th consecutive year, bringing together investors and start-ups from around the world, the buzzword is again on the tips of everyone’s tongues.

One cannot forget, however, that the Portuguese start-up scene is still in its own incubation period, and for all the noise and attention we are yet to catch up to other hubs such as London, Berlin or Amsterdam, says João de Macedo Vitorino. Having got through the ‘seed stage’ and embracing its position in the ‘early stage’, Portugal’s ‘growth stage’ is yet to be conquered. “For this, one needs to look beyond a reliance on public funds and incentives, and follow the lead of other markets, as well as promoting and capitalising on the country’s traits that make it unique and conducive to a start-up ecosystem.”

 

Subsidies and Summits

In a bid to put Portugal on the start-up map, recent years have seen the Government drive through numerous initiatives and incentives to boost the start-up ecosystem and promote sustainable economic growth, innovation and opportunities. From a €200m venture capital fund aimed at boosting foreign investment in start-ups, StartUp Portugal (with over 20 initiatives for attracting new investment, talent and innovation) to a StartUp Visa for foreign entrepreneurs and tax incentives for non or new residents.

With over 70,000 attendees, the Web Summit has been a boost to various aspects of this country’s economy, such as tourism, and also created a demand for supporting facilities including incubators and accelerators.

Drawing investor attention to Portugal in any format is welcome, says João de Macedo Vitorino, whether via attractive initiatives, monetary benefits or events. But one needs to take these subsidies and summits with a pinch of salt, he adds. Many subsidies have a limited lifetime and an array of conditions that are very difficult to fulfil, while the Summit itself lasts four days and what we need is to ensure that our eco-system continues to attract ideas and investment for the rest of the year. “For that we need to promote the infrastructure we have in place to support it and the traits of our country and people – why Portugal is the right place to start up and invest.”

 

Market lessons

Looking to other markets that have started using similar public structures and subsidies to fund their start-up ecosystems, explains João de Macedo Vitorino, in the end you are attracting all kinds of ideas and paying for ideas which are not, or may not be successful when viewed from a market perspective. “If you look at the figures of the investments that were made in France this way, there were some tax companies founded and jobs created, but those jobs and those companies might have found better ways of existing and in a less costly way than by using public funds.”

If we look to the US, Germany or UK, these are of course far more dynamic markets, he says. “And their eco-systems have adapted. Big corporations have their own ideas and take their ideas to market, and they have started attracting entrepreneurs because they realize that it's much less expensive to invest in potentially good ideas than to have to buy them afterwards for a great deal of money. So the market itself created this thirst for new ideas and an environment that is favourable to seek and grow ideas from people who would not otherwise have the means to do it.”

These markets create solutions to cover gaps, such as corporations making their own labs, venture capital increasing and investing in diverse risks so they can invest more. “It's one thing trying to put ideas in people's minds or incentivising people to do things that they otherwise would not do,” explains João de Macedo Vitorino. “It is quite another to have a market where everyone is trying to succeed, sell their own ideas and invest in others.”

That is what the goal should be for Portugal, he adds. Ensuring the environment here is such that the market goes from publicly funded to a more self-sustaining one.

 

The Portuguese advantages

As the digital world tends to be focused on universal products, these days there are no frontiers for the digital economy. So you can really start anywhere, says João de Macedo Vitorino. “The key is to find an environment that supports your start-up, both the place and the people.”

He highlights the fact that the digital economy requires people that are open- and internationally-minded, free thinkers and flexible, who can move from idea to idea and adapt quickly and painlessly. “These are all Portuguese qualities that I believe make us more naturally capable to succeed in the digital world as we have in traditional commerce. It’s our natural way of being as a country and as a people, and if you do things against your own nature it becomes much harder. Working with a people who already possess these traits in their DNA is a distinct advantage.”

Portugal also benefits from having a very qualified and skilled work force of multi-lingual talent, and we are seeing this focus on our talent with big business establishing bases in Lisbon for their European operations, says João de Macedo Vitorino. Mercedes for example –  and others who are especially taking advantage of Portugal’s young tech talent.

The country is also investing in infrastructure to support the start-up ecosystem with hubs opening across the country, such as the Beato Creative Hub, a large-scale incubator in the north of Lisbon for start-ups and other tech businesses, including the Daimler-Mercedes research centre. “And it is precisely this type of infrastructure, coupled with the people behind it, that will strengthen the foundations of our start-up ecosystem,” he says.

Additionally, with political uncertainty prevailing around Europe - Brexit being a case in point, this is a definite concern for any potential investors or entrepreneurs. Portugal’s stable political climate without a doubt plays a part in amplifying its attractiveness, says João de Macedo Vitorino.

 

“We have made great strides in getting Portugal on the start-up map, and while subsidies and summits are a good first step for Portugal’s start-up ecosystem, we now need to take this a step further,” he says. “We must look past exclusively publicly-supported environment and ensure that the Portuguese eco-system is an attractive marketplace of ideas and investment with the necessary infrastructure to support it for years to come.”

#whyportugal

Quick and simple registration systems can save your IP from falling into the wrong hands and ensure your business and your brand are protected in Portugal.

In today's world a business’s brand is as important as its product or services. And the intellectual creations behind it are what gives a business its unique competitive edge. The importance of protecting your Intellectual Property (IP) assets cannot be undervalued. Neglecting to do so can put your business at risk, affecting essential core services and your long-term viability.

Are my IP rights covered in Portugal?

Yes, it has never been quicker or easier to ensure your IP rights are protected on par with other EU Member States and in line with EU directives. Portugal is also member of the World Intellectual Property Organization (WIPO) and party to numerous international agreements, including the Berne Convention, the Universal Copyright Convention, the European Patent Convention and the Patent Cooperation Treaty.

The law covers your industrial property rights – trademarks, patents and designs – and your copyright, which protects literary, artistic and musical works, multimedia creations, videograms and phonograms, computer programs and databases.

To note, while IP rights are territorial, many can be registered at the Portuguese Institute of Industrial Property (INPI) for both national and EU protection, while other EU rights must be arranged direct with the relevant EU European Patent or IP Office. International rights must be handled with the WIPO.

What falls within the category of ‘trademarks’?

From non-generic words, logos, slogans, sounds, etc., your trademarks are your brand – think McDonald’s golden arches or Nike’s “Just do it”. These important business assets distinguish a business, its products and services within the relevant market. We cannot emphasis enough the importance of securing your right to trademark your products, etc., as yours and yours alone.

Registration protects your rights for 10-year periods, without limits on renewal, but to be eligible, signs have to be unique or distinctive, such that they could be easily identified by a third party. ‘Signs’ can be represented graphically, by words, people’s names, drawings, letters, numbers and sounds, for example, as well as the form of the product or respective packaging and even your advertising slogans. What ‘signs’ cannot be is descriptive or just the name of your product or service.

To note, well-known or prestigious trademarks are given a special degree of protection, even if they have not been registered.

How are trademarks registered and where will they be protected?

Any person or legal entity from any country in the world can apply for the registration in Portugal, and you can do it online at https://inpi.justica.gov.pt/, but for entities, all stakeholders must take part. Trademarks registered at the INPI are only protected within Portugal, so if you are looking for EU-wide protection you must register at the EU IP Office.

For international protection in over 100 countries, you have to register with the WIPO. You must have a business, be a national or domiciled in a member country of the Madrid System (International Trademark Registration Treaty), but be aware that each country’s national law governs the registration so your application could be accepted in some and rejected in others.

Trademark applications in Portugal will be denied if they are a reproduction or imitation of a well-known Portuguese trademark, or if they apply to identical or similar products or services that could cause confusion with that well-known trademark. Applications will also be refused if the trademark is identical or similar to a prestigious Portuguese or EU trademark, even if related to different products or services, in a way that takes unfair advantage of the prestigious trademark or causes it injury.

To watch out for at both national and EU levels is the fact that trademarks need to be actively used for five consecutive years, otherwise the registration expires, and once your trademark products are in the EU market, your rights are considered exhausted and you cannot disallow the use of the trademark on the product.

What rights are protected by a ‘patent’?

If you have got a new invention, way of solving a technical issue or even a new way of doing something, protecting it with a patent is paramount. This ensures your right to exclusive use and that others cannot use your ‘invention’ without your express permission for 20 years from the date of application in Portugal. You can also apply for a supplementary protection certificate that extends protection for a further if you are dealing in pharmaceutical and plant protection products.

Portuguese patents protect others from manufacturing, offering or storing an invention with an industrial use without your consent. This includes anything biological in nature or process that produces, treats or uses biological material but does not extend to: discoveries; scientific theories and mathematical methods; materials or substances already in existence; nuclear materials; aesthetic creations; schemes, rules and methods for performing mental acts, playing games or doing business, computer programs and informative presentations. If the commercial exploitation of an invention would be contrary to Portuguese law, public policy, public health and good practice then it is also excluded.

To be covered, your invention has to be novel, capable of industrial application, and it cannot be something that would be obvious to someone with average knowledge in the relevant technical field. Once you have the patent you must exploit the invention within four years from the application date or three years from the date it was granted, whichever is longer, and you have to commercialise the results.

To note, a patent can be used by a third party if you enter into a license agreement or through its sale to a third party.

How and where are patents registered?

As with trademarks, registration is territorial. For protection valid in Portugal you must register at INPI, in person or online at https://inpi.justica.gov.pt/ and for an EU-wide patent (not including Spain and Croatia) you can either do so at INPI or direct with the EU Patent Office but the application must be in either English, French or German. The patent will be automatically validated in all EU Member States and only subject to maintenance fees in one country, but be aware that national laws govern registration in each country. Relevant fees apply and the protection period for both is 20 years.

Once the patented products are placed on the EU market, your rights as the patent-holder are considered exhausted and you cannot disallow acts related with the patented products.

International patents are dealt with by the WIPO, ensuring your patent is protected in over 150 countries with a single application and set of fees. The applicant must be a national or resident of a member country of the Patent Cooperation Treaty. However, it is the national laws that govern the registration in each country.

When does a ‘utility model’ apply?

If you don’t meet the patent criteria, you can always try for a utility model with the INPI with applications in person or online at https://inpi.justica.gov.pt/. With less stringent requirements, a simplified approval process and lower fees, this applies to minor inventions – products or procedures with industrial application – that still require a level of protection.

Utility models, however, don’t cover anything biological in nature and last only six years from the date of application. This can be extended, but only up to a maximum of 10 years.

What protection can secure ‘design’ rights?

Your business’s designs need to be safeguarded, granting you exclusive rights and ensuring third parties can’t copy or commercialise them. Design rights protect visual appearance, shape or configuration for unique two- or three-dimensional forms, and while they don’t have to be 100% ‘new’ they have to include novel combinations or layouts of known elements with a distinctive character.

Once registered in Portugal, designs are protected for five years periods from the application date, renewable for up to a maximum of 25 years. Registered designs also benefit from automatic copyright protection applicable from the date of creation.

You can register for national protection at INPI and EU-wide at the EU IP Office with just a single set of fees to cover all Member States. WIPO registration grants protection in 65 countries, and to qualified you must be a business or be a national or domiciled in a country that is part of the Madrid System. Once again, it is national laws that govern registration in each country and your rights are considered exhausted once the products where the design was incorporated or applied are placed on the EU market.

To note, unregistered Community designs have an automatic three-year protection as from the date of their public disclosure within the EU. This prevents commercial use from any copy of the design by third parties.

How can works be copyrighted?

Once an idea has been physically expressed, then copyright comes into play, protecting literary and artistic works, music, software, architectural works and even databases and computer programs, among others.

Copyright does not have to be officially registered to be protected – its automatic upon the creation of the work. It is highly advisable, however, to register with the relevant authorities worldwide to ensure that you control whether, or under what circumstances, the work can be used by third parties, and gain recourse if used without permission

In Portugal, you may register with the General Inspection of Cultural Activities (IGAC), part of the Ministry of Culture, and you can even delegate the administration of your copyright to a collecting society, like the Portuguese Society of Authors (SPA) or ASSOFT - Portuguese Association of Software. Portugal also is party to international treaties and conventions (such as the Berne Convention) that allows for protection in numerous countries.

Authors or copyright owners of any works covered by copyright have the right to assign or licence their economic exploitation. Protection generally runs for 70 years following the death of the author or from posthumous publication, after which the works enter the public domain and can be used freely. This does not, however, apply to what is known as the ‘moral’ rights to the work. As an author this means you have the right to be recognised as the author of the work and to protect it. ‘Moral’ rights are not assignable, cannot be sold, allocated or waived – even if the author authorises its exploitation – and they continue indefinitely.

What protection is afforded to databases and computer programs?

Databases are covered by copyright if considered an ‘intellectual creation’ under the Portuguese Protection of Databases Law. This lasts 15 years from the end of the calendar year in which the database was created. And there is even implied protection for unregistered databases where substantial investment is involved in obtaining, verifying or presenting its contents.

Computer programs can get the same level of protection as literary works if they fall within the legal criteria of being ‘creative’, as defined in the Portuguese Computer Program Rights Law and you can register the program on the IGAC or ASSOFT. Any unauthorised economic exploitation is considered a violation of the Portuguese Computer Program Rights Law and deemed a criminal offence under the Portuguese Cybercrime Law.

As the program author, you have ‘personal’ rights, meaning you have the right to be recognised as the author of the work and can mention the program’s name. As owner of a program, you have the right to economic exploitation including permanent or temporary reproduction by any means and in any form, make changes and any other modifications as well as reproducing the results and distribution to the public. In addition, you can put originals or copies into circulation and to rent out those copies. Also, a program created by an employee in the execution of their duties or following instructions given by their employer, is considered a ‘collective work’ owned by the company.

To note, anyone with the right to use a copy of the program can, without the authorisation, make a back-up or observe, study or test its functioning, and a licensee or anyone with the right to use it (or on behalf of someone authorized to do so) can perform a decompilation of the parts necessary for interoperability with other programs. This is only legal if obtaining the information is intrinsic to achieving interoperability and if the information is not easily accessible.

Can ‘trade secrets’ be protected and what circumstances do that cover?

Any confidential business information giving competitive advantage to others can be considered a trade secret, and it is your business’s most valuable asset. This includes information obtained from business plans, customer data, recipes and manufacturing processes through to know-how and technical knowledge (potentially patentable). Trade secrets don’t require registration to be protected, it is automatic, but there are certain conditions that need to be met.

The disclosure, acquisition or use of your trade secrets without your consent is illegal if the information is secret, has commercial value due to being secret and has been subject to considerable diligence by the person responsible for the information in order to keep it in secret. It is also illegal if someone, at the time of obtaining, using or disclosing a trade secret, had or should have known that the secret had been obtained directly or indirectly from another person who was using or disclosing it illegally.

It is not illegal however if someone gets your trade secrets through independent discovery or creation, due to the employee’s (or their representative’s) right to the information, through consultation in accordance with national practice or the law or in other circumstances that are considered to be in line with honest commercial practices.

If there has been a breach or well-founded fear that others could cause serious and irreparable damage to your trade secret, the court may, at your request, order the appropriate precautionary measures. The court can also order the prohibition of the use or disclosure of the trade secret, the production, offering, placing on the market or use of the infringing goods, as well as the import, export or storing of the infringing goods for those purposes.

We also advise that whenever you are dealing with the exchange of confidential and sensitive information to business partners, shareholders, employees, suppliers and customers, you enter into a non-disclosure agreement in case unfair competition, abuse of right and other legal rules protecting business secrets do not apply or offer sufficient protection.

 

For help with this and all your IP rights, as well as how we can help ease the process, read our Guide ‘Why Portugal?’.

#whyportugal

The first edition of the Web Summit in Dublin in 2010 had 400 attendees. In eight years, the last two in Lisbon, the number of attendees increased to over 60,000. It is expected to reach 100,000 soon.

One of the reasons for the growth of the Web Summit is its location. Lisbon is a secure, eye-catching, open to new experiences and socially vibrant place. These qualities contributed to make Lisbon one of the best locations in Europe to host the largest web event in the World. But to host the Web Summit the Portuguese Government and the City of Lisbon made a significant financial investment.

The Web Summit promotes Portugal and Lisbon and contributes to the frenzy about Lisbon that is attracting not only tourists and retirees but also foreign students and young people from all corners of the World wishing to experience living, studying and working in Lisbon.

Portugal is more than a low-cost lifestyle country with sun, surf, nice food and friendly people.

Of course, lifestyle opportunities help to attract tech talent, but Portuguese tech ambitions go far beyond: Portugal wants to attract young entrepreneurs and start-ups.

In 2006, the Portuguese government partnered with the Massachusetts Institute of Technology (MIT) to create the «MIT Portugal Program» which was renewed in 2013. With the help of the MIT, Portuguese Universities and Research Centres and the Instituto Politécnico in Bragança, UpTec in Oporto, Lisbon Instituto Superior Técnico and Instituto Politécnico and Nova School of Business and Economics, are investing in new fields of knowledge such as biomedical engineering, sustainable energy, and advanced manufacturing.

In 2018, Nova School of Business and Economics inaugurated an ultramodern campus in Carcavelos, near Lisbon, mostly financed by private funds, something rare in most European countries, where States are still the main funders of academic institutions. Portuguese academies are now working together with businesses to create innovative products in several fields, including in traditional sectors like clothing and shoes.

Several tech companies have offices at «UpTec» in the University of Oporto’s campus, sharing knowledge and best practices and strengthening a culture of networking and mutual co-operation.

It is easy to start-up a business in Portugal. Start-ups also benefit from incentives schemes, such as «Start-up Voucher», the «Seed Program» (Programa Semente), «Start-up Portugal Momentum» and «200M Program».

Tech incubators and newly refurbished coworking spaces are appearing all over Lisbon. Hub Creativo Beato, is a 35,000-square-meter project developed by the City of Lisbon in a former army food factory complex located, which is being converted into a large site for start-ups and other tech businesses like Daimler-Mercedes’ research centre.

Other tech giants, like Uber, Zalando, Euronext, Huawei, Amazon and Google set up facilities in Portugal, taking advantage from our lower cost of living and existence of the local talent pool.

Meanwhile, there are two Portuguese start-ups that take part of the universe of 260 unicorns (valued at over US$ 1 billion) worldwide: Farfetch and OutSystems.

This means that hosting the Web Summit is more than a good advertising coop for Lisbon: Portugal is becoming serious contender for start-ups competing head-to-head with London, Dublin, Paris, Barcelona, Rome and other places in Europe.

 

As we approach 29 March 2019 the race is on for banks and financial investors to prepare for a fundamental change in the way they have been doing business in Europe in the last 25 years.

The European Union (EU) gave London more than a base for expansion in the European common markets, it also gave London the conditions to establish itself as a leader in modern global financial markets. The EU unified set of rules gave London the platform to dominate Europe’s unified financial markets, cementing its position among the World’s top financial centres.

It is true that London has been, along with New York, one of the main financial centres in the World since the XIX century. However, XXI century global capital markets are very different from financial markets in the XIX and XX centuries.

Globalization of the financial markets requires size and Europe gave London the grandeur it had lost after the World War I. As the hub for European financial markets operations, London became an unique place in the World, a bridge between East and West.

Will all of this be lost on 29 March 2019? The answer is inevitably “no”. But since Brexit was announced we have seen an erosion of London’s position in the global markets. Global players are planning for Brexit. In any context, a hard or soft Brexit, financial institutions and investors are no longer considering London as the centre of European finance. Other locations emerge wanting to take that role: Paris, Frankfurt, Amsterdam and Dublin. All have an eye for a lucrative market until now dominated by London.

The tendency seems to be for banks and other financial investors to keep a significant presence in London and open other important operation centre or centres in mainland Europe and sometimes in Ireland. Internet-based systems allow for a virtual presence anywhere in Europe, so the choice will be driven by convenience, cost, tax and the incentives local governments will give to attract these investors.

The end of London’s dominance seems to anticipate the loss of English law and English courts’ pre-eminence in financial law matters. Unsurprisingly, it is more difficult to change from English law and English courts to French, German or Portuguese law than moving offices from London to Paris, Frankfurt or Lisbon.

The arguments for choosing English law and English courts are clear: a sound, business friendly, reliable and trusted system of law applied by courts that are commercially aware, fast and predictable. All of these arguments lauded by London based law firms play in favour of English law and English courts.

However, banks are concerned that when they move to Europe there will be no reason to choose English law, which will be a foreign legal system after Brexit and that will not be related to them or their clients. Also the laws of EU countries will continue aligned by EU directives and regulations while English will start to deviate from EU law. This means that while contractual terms can be governed by English law, the regulatory aspects of financial instruments will be governed by EU law and local laws harmonized by EU legislation. English law will add unnecessary complexity that will only be justifiable if the advantages of the English legal system, law and courts, significantly outweigh the advantages of keeping the entire transaction under the umbrella of a single legal system.

Another point to consider is the origin of clients and investors. While the UK was part of the EU, there was no issue for a client or investor to question the choice of English law and English courts because of the advantages of the English legal system which we highlighted above and the fact that as part of a unified and integrated market, the UK offered the best of the two worlds. After Brexit, investors will question the choice of English law and English courts in favour of their own legal system. Why should a French, Spanish, German or Portuguese client or investor prefer English law, which many times will be totally foreign to the transaction, in relation to the laws of an EU country?

In the US financial markets, NY law and NY courts is the obvious choice. US investors and those gravitating around the US, such as Asian, Latin American and Middle East investors, trust the choice of NY law and NY courts. In Europe, English law and English courts will cease to preform that role in a post-Brexit world. In the last 25 years, English law imposed itself due to the business minded approach of city of London and the weight of the European markets to which investors from other latitudes adhered.

After Brexit, English law and English courts will not be as attractive to investors, who will mistrust the added complexity and the risk of local courts having to confirm English courts judgements. English law and English courts will retain an important role in international, maybe larger than the role of City of London banks and financiers, but not the same dominant role they had until today.

Paris courts and French law are emerging as the strongest challenger, but the importance of Paris in Europe’s next financial hub will depend on the ability of the country to present to the finance world a well-established, predictable, creditor and business friendly set of rules, faster court decisions and no political or ideological bias. In essence, continental European countries have a system of rules that is predictable and fair, but court decisions are less predictable, less business friendly, sometimes contaminated by ideological considerations and many times slow. Recent events in France show that it will be difficult for Paris to give the same assurances as London.

If the flaws of Europe’s legal and court systems remain unchanged, English law and English courts will keep a pre-eminent role in Europe’s financial markets once the short-term effects of Brexit fade away and people get used to border controls and other idiosyncrasies of a divided Europe. As a Portuguese wishing financial investors choose Lisbon to set up their European headquarters, I propose:

  • First: create a business friendly and creditor friendly legal environment, with no bias against banks and financial investors;
  • Second: put together a clear set of rules, predictable, less open to variations in interpretation and not dependent on general well-intended considerations that impair the application of the law in its full force; and
  • Third: set up specialised finance courts that are quick in deciding, commercially aware and practical in their decision making process.

We doubt that Portugal or any other EU country will be able to do all three things, but Europe could lead the way and issue directives and regulations to create a Pan-European unified body of rules concerning commercial borrowing and lending and other financial matters and propose that countries create specialised courts dealing with finance matters to solve matters more quickly and by way of a specialised court system gain the experience needed to better decide these issues.

The Portuguese Parliament discussions on the draft 2017 budget presented by the Government are on the way.

The draft forecasts a budget deficit of 1.6% of the GDP which, if achieved, would be the lowest Portuguese budget deficit in 40 years.  A 0.8% deficit cut should make EU Commission happy and the Government expects to reach it despite of the €10 increase in all lower pensions imposed by the far-left parties to approve the budget, the entire removal of all cuts in public officers' salaries and pension made from 2010 to 2015 and the phase-out of the 3.5% personal income tax surcharge.

Considering the increase in public spending and the reduction in income tax revenues, it does not come as a surprise that, despite the “treats” offered by the Government, fiscal policy will have to do its “tricks” and taxes overall will have to increase further.

The Government had already announced in November 2015 that it would stop the corporate income tax reform, which contemplated a reduction of the general rate from 21% to 20% in 2016 and from 20% to 19% in 2017. The draft 2017 budget confirms that the general rate will remain unchanged.

The removal in 2017 of the personal income tax 3.5% surcharge, approved by the Government in December 2015, will now only apply in full to those earning less than €20,261 euros a year. Taxpayers earning up to €80,640 will only benefit from a gradual phase-out in 2017 and those earning more than €80,640 will have to wait until December.

In addition, the Government decided to resort to an increase of indirect taxation. Not only to the recurrent increase of taxes over vehicles, alcohol, oil products and tobacco, but also to a new tax on sugary and low alcoholic drinks (“fat tax”), an extra 0.3% tax on real estate above €600,000 (which will be levied on top of the current real estate tax) and even a special tax on gun shells.

Notwithstanding the 2016 figures on the budget implementation disclosed last week showing that indirect tax revenues, including VAT, are expected to fall below the forecasts made in the 2016 budget, the Government seems convinced that there is still room to increase indirect taxation. And the fact is it may well be right.

As an example, the new fat tax on sugary and low alcoholic drinks should raise a mere €80 million in 2017. But what prevents the Government from increasing it in the next years, as it was done in respect of all other excite taxes in the last years? And why leaving other sugary products out of this tax? After all, aren't these products associated with weight and obesity problems?

The room to increase indirect taxes seems endless and new taxes are very likely to appear in the next years, such as the inheritance tax over high-net-worth estates - which was included in the Government’s programme and is waiting for the right moment - and the financial transactions tax - which is waiting for EU approval.

The 2017 budget shows a clear trend to give preference to indirect taxes, which already represent more than 50% of the whole tax revenues. One of the arguments used by the Government is that this is the only way to reduce personal income tax.

A more pragmatic perspective would argue that indirect taxes are efficient, raise less controversy and could even be more popular, if you have the right arguments - in reality, many times the end consumer will not even notice them, especially if they have a marginal impact on prices.

The downsides are known: unlike direct taxes, indirect taxes are regressive and will treat taxpayers equally irrespectively of their income, which may increase inequality and affect those with low income; on the other hand, some indirect taxes may harm competitiveness of the economy as a whole and/or of some products produced locally, especially if they entail an increase of production costs (e.g. taxes on oil products/power).

For now, the Government seems to have accomplished what some considered the impossible mission of squaring the circle: increase taxes and keep everyone happy! However, if inflation, interest rates or oil prices increase in the near future, the Government and taxpayers may be faced with a new dilemma: trick-or-trick?