Historic Evolution

Máquina de calcualr (IGCP)
Calculating machine (IGCP)

The forerunners of the Ministry of Finance date back to the late 15th century, almost five centuries of history. Throughout this time very diverse forms of organisation were introduced but with common functional objectives, i.e. the government and the administration of the financial area. Its history can be divided into seven phases according to the schematic diagram on the following page, each one corresponding to different institutional and political models.

First Phase

The first phase (1495-1516) refers to the autonomisation and affirmation of the office of treasurer. In fact, from the mid 15th century, the need had been arising in the Desembargo Régio to distribute, through certain officials, the petitions referent to Exchequer Business. This specialisation logic in the decision and order would give rise to the creation of the specific office of Vedor da Fazenda.

Second Phase

The second phase (1516-1591) saw the creation of specific bodies called Vedorias. The increase in administrative work and bureaucracy brought about an increase in the number of staff as well as the emergence of other related positions which would continue to grow, such as clerks, janitors, caretakers, minor officials, assistants, distributors, treasurers, scribes, etc., transforming the office into a functional entity.

Third Phase

The third phase (1591-1761) was dominated by the extinction of the vedorias and the appearance of the Conselho da Fazenda which would exclusively take on the handling of material related to the exchequer for approximately two centuries. The Council was a true royal tribunal in that, on the one hand, it had its own powers and on the other, it submitted extraordinary affairs to royal order, through administrative consultancy. As a corporate entity, the Conselho da Fazenda gathered its councillors at round table and decisions were made in a collegial manner.

Fourth Phase

Mala de Ouvidoria (IGCP)
Judge’s Bag (IGCP)

The fourth phase (1761-1801) saw the creation of the Erário Régio. Administration of the financial area came under the bipartite responsibility of the new body and the Conselho da Fazenda. The new administrative policy consisted, fundamentally, of three aspects:
a) The joining and coordination of all of the offices whose mission was to collect taxes; b) A new type of hierarchical responsibility given that the President of the Erário Régio answered directly to the Secretary of State for Exchequer Business;
c) New operating methods, given that the running of the Erário Régio was now being governed under unipersonal direction, i.e. the final decisions were made by the President and not by a Board or at Meetings.

Fifth Phase

In the fifth phase (1801-1834), the bipartite management gave way to a tripartite assumption of responsibilities between the Conselho da Fazenda, the Erário Régio and the recently created Secretariat of State for Exchequer Business (1). This consisted of testing, for the financial area, the application of the ministerial government model at a time when the institutions of the Old Regime had been losing political and administrative prominence since the Pombaline reforms.

Sixth Phase

The sixth phase (1834-1910) was dominated by the consolidation and growth of the Secretariat of State for Exchequer Business following the extinction of the Conselho da Fazenda and the Erário Régio as a result of the military victory of the liberals (Évora-Monte, 1834) and the implantation of the new constitutional regime.

Seventh Phase

Pormenor do tríptico de Jaime
Detail of the triptych by
Jaime Martins Barata,
1959, D. Afonso V giving
acquittance by verbal
pardon. Sessions Room
in the former Court of Auditors.

Finally, the seventh phase (1910-1999) is related with the creation and structuring of what is today the Ministry of Finance and covers the entire republican period. From the point of view of the political matrix, while the first five phases are included in the logic of the corporate system (1495-1834), the last two (1834-1999) correspond to the implementation of the state political system, which gave rise to a new form of organisation of power so that, in effect, the closest radicalisation to the current ministry should be identified with the Secretariat of State for Exchequer Business. The fact is that this was created alongside the Erário Régio and the Conselho da Fazenda, bodies which were in charge of the administration of the royal exchequer, the last, as we have seen, from the end of the 16th century. But, to have a more complete view of the institutional evolution of what is today the Ministry of Finance, the best way is to compare the human resources involved in this area of government.

Personnel in financial institutions (Central Bodies, approximate numbers) (1495-1998)

Gráfico

Body	Totals	Year
Vedorias	15	1516
Conselho da Fazenda	35	1591
Erário Régio	30	1761
Secretariat of State for Exchequer Business	15	1801
Erário Régio	70	1820
Secretariat of State for Exchequer Business	20	1820
Secretariat of State for Exchequer Business	200	1869
Ministry of Finance	500	1910
Ministry of Finance	1 300	1960
Ministry of Finance	4 500	1998

As can be seen from the table and the graph quantifying and representing these resources, the contingent of employees in the central bodies of exchequer administration, since the beginning of the constitutional regime, has continued to grow, especially noticeable in the 19th and 20th centuries.

Organisation

With regard to the organic matrix as we know it today, it can be said that its definition dates from the reforms of 1869 and 1870 resulting in the creation of the General Secretariat, the Office of the Minister, as a body directly supporting the minister, the network of general directorates which made up the central administration bodies, the set up of the peripheral and local administrative geography of the ministry and the Court of Auditors taking on the function of taxation, formerly carried out by the Conselho da Fazenda. However, it was only with the implantation of the republic (1910) that the Secretariat of State for Exchequer Business became known as the Ministry for Finance, which name, barring rare exceptions, would remain in use until the present day.

Pormenor da escadaria nobre
Detail of grand staircase

The reform of 1911, creating district financial directorates in the district seat and tax offices and branches as well as customs services in every municipal seat, would consolidate on the one hand the structures inherited from the monarchist-liberal regime and would introduce the outlines of the model which would remain in effect, generally speaking, to the present day (2).

Another important moment in the recent history of the Ministry of Finance dates from the New State, for two reasons in particular. In the first place, it was the pivotal ministry during the leadership of António de Oliveira Salazar (1928-1940) in that it became the centre for budgetary discipline and the fulcrum of the reformed civil service. In his farewell speech as Minister for Finance (1940). Oliveira Salazar would say that the Ministry for Finance "was the starting point for all administrative reform". And, in the second place, under the direction of João Pinto da Costa Leite (1940-1950) it was the ministry in charge of the taxing of financial activities, especially with regard to the new activities attributed to the General Inspectorate of Finance, Customs and Contributions and Taxes.

From 25 April 1974, the most significant modifications from an organic point of view would be the creation of the Directorate General of the Treasury and the Directorate General of Heritage (1976), the former being in control of the financial operations carried out by state services and corporate bodies and the latter, the provision, inventory, inspection, administration and management of state heritage.

A little later, the Office for Organisation and Information was created (1985). This was to be the origin of the present IT Institute, in response to the new needs arising from the technical and technological revolution. The structures of the Directorate General of Customs and the Directorate General of Contributions and Taxes were also reformulated. However, over the last twenty-five years there has been no profound reform of the ministry.

Only very recently has the present government (since October 1995) been able to fulfil the necessary adequation to the new challenges imposed under the context of the Economic and Monetary Union and the demands of the democratic regimes. First, with the publication of the Organic Law of the Ministry of Finance (D.L. no. 158/96 of 8 September) and later with the continued process of structural change through the approval of nine organic-functional regimes, namely the Legal Status of the Taxpayer Defender, the new organic laws of the Directorates General of European Affairs and International Relations, Studies and Estimates of the Budget, of IT and Support to Taxation Services, General Inspectorate of Finance, IT Institute, General Secretariat, ADSE, the Statutes of the Portuguese Government Debt Agency, the Portuguese Insurance and Pension Funds Supervisory Authority and the National Institute of Agricultural Intervention and Guarantee, apart from the alterations to the Organic Law of the Directorate General of Taxes and the Directorate General of Customs and Excise and the creation of the General Taxation Administration, pending approval from the Council of Ministers.

Reorganisation of Taxation Administration

Jarra em porcelana da China,
Porcelain vase from
China, late 19th century.
National Museum of Ancient Art

Today, it is clearly justified that the government concludes the reorganisation of the Taxation Administration, which includes the creation, alongside the three aforementioned general directorates, of a new organisation, General Taxation Administration, which shall perform the functions of higher direction, coordination, control and strategic planning of the general taxation directorates, supported on the performance of internal supervision tasks, study and support of the conception of public taxation policies, taxation training and the conception and planning of the information systems.

For various reasons, the increased importance of the organisation of the public services of the Ministry for Finance has become evident, integrated into the direct administration of the state, and which, as a whole, form what is called the Taxation Administration: the Directorate General for Taxation (DGCI), the Directorate General of Customs and Excise (DGAIEC) and the Directorate General for IT and Support of Taxation and Customs Services (DGITA). In the first place, it must be remembered that, historically, it was the decisive efficacy of the taxation administration of the Old Regime which permitted the constitution of the modern state and that only increased levels of that efficacy in the obtaining of fiscal resources could permit the construction and now the preservation and development of the Social State, through extending and improving the quality of state intervention in social life.

In the second place, it is notable that the taxation administration has always been seen as a special organisation in the life of the state. The special nature of the taxation administration is corroborated from the outset by having been called the Exchequer by us as well as by the so-called civilised nations. On the one hand, it is seen as being integrated into the State and, on the other, distinct and differentiated from it. In the third place, the current objective importance of the taxation organisation can be inferred from the following data: approximately 15 000 employees, with running and investment expenses of approximately 90 thousand million escudos, in 1998, and assuring the collection of 5,498.8 thousand million escudos (the DGCI: 4,396.7 thousand million and the DGAIEC: 1,102.1 thousand million escudos), which in “volume of business” signifies that it is clearly the largest Portuguese “company” and bigger than most other Ministries, from the point of view of the human and financial resources employed. It also signifies the increasing importance of the taxation administration in the current context where Portugal is part of the Economic and Monetary Union and bound by the Stability Pact, which imposes an urgent need for rationalisation of organisation and decision-making procedures, as well as reaching efficacy in the obtaining, justly, of financial resources. Fourthly and lastly, the administrative organisation, although legally framed, is a material assumption of individual decisions in the taxation area, as indeed in any other area, of good administration through individual or collective acts by the taxation authorities, which depends decisively on the prior and adequate organisation of administrative measures.

Relógio em bronze
Bronze clock (DGAIEC)

It is then clear that the coordination, control and strategic planning of such an important and significant organic structure can no longer be assured with organisational solutions similar to those provided by three general directorates, which situation permanently generates the irrationality of economies, inefficiency and ineffectiveness in the midst of the Taxation Administration. It is known that the so-called principle of parsimony is a maxim which valorises simplicity both in the construction of theories and in practical solutions. The most common formulation of this maxim is, in Latin: Entia non sant multiplicanda praeter neressitatem, (Entities should not be multiplied unnecessarily); and also: Frustra fit per plura quad potest fier iper pauciora, (It is in vain that what can be done with less is done with more).

However, it is well-proven, through the experience of recent years, that the current organisation of the Taxation Administration does not permit sufficient, and much less reasonable or good, conditions for direction, coordination, control and strategic planning of the taxation organisations. Thus, and respecting the principle of parsimony, it becomes evident that there is a need to increase the organisational means available for those functions of common interest of the Taxation Administration, namely, apart from those already mentioned, those of internal supervision, study and support for the conception of public taxation policies, taxation training, from the outset for managers, and conception and planning of information systems. It is expected that the General Taxation Administration (AGT) will be created as an instrumental state corporate body, submitted to the tutelage and supervision of the Minister of Finance and run by three higher entities: the taxation high council, the managing council and the president of the managing council. The taxation high council shall be the supreme body of the AGT, and is composed by the Minster of Finance, presiding, the Secretary of State for Fiscal Affairs, the president of the managing council and the managing directors of the DGCI, the DGAIEC and the DGITA. The managing council shall be composed by the president of the managing council, presiding, and by five board members, three of whom shall be the managing directors of the DGCI, the DGAIEC and the DGITA. The president of the managing council shall be the sole executive of the General Taxation Administration. It is expected that, by directive of the Minister for Finance, support services will be set up for these higher AGT bodies.

Gabinete do Director-Geral das
Office of the
Director-General of
Customs and Excise.

The National Fiscal Council of the AGT would also figure as an advisory and participating body. It is also expected that four services will be created in the AGT as common taxation administration structures: the Internal Supervisory Service, the Centre for Studies and Support to Taxation Policy, the Taxation Training Institute and the Strategic Planning Service for Information systems. At the same time, the services with similar tasks in the DGCI and the DGAIEC, as well as the coordinating council of the DGITA, shall become extinct.
The experience of the coming years will tell if the most adequate solution shall be the simple higher direction and common coordination now outlined or if the road should be taken towards a solution of perfect integration of the taxation organisations, where, bearing in mind the delicacy of the functions carried out by all (represented by the permanent tension between the fundamental duty of paying taxes and fundamental economic rights, on the one hand, and the urgent orderly satisfaction of the collective needs assured by the state, on the other hand), as well as the status of the organisational culture and historical tradition of each one of these, no advantage can yet be seen in instantaneous implementation.

On the other hand, in so far as there has been internal reorganisation of the DGCI, the DGAIEC and the DGITA, and this being the case, it is expected that, through a joint directive from the Minster for Finance and the member of government holding the Public Administration portfolio it will be possible to transfer certain services from these taxation organisations to the AGT, thus placing them together, excepting of course the organisational specificities adequate to distinct taxation missions. As a complement to these alterations in structure, there are numerous initiatives, in the study and analysis plan, carried out by working groups and commissions under the scope of the High Council of Finance, bearing in mind the fiscal reform for the beginning of the 21st century. (3)

(1) – The formal creation of the new Secretariat of State was brought about by Decree of 15 December 1788.
(2) – The case of the terms Finance and Economy (1969-1974); of Finance and Economic Coordination (1974) and of Finance and the Plan (1978, 1980-1985).
(3) – On these initiatives and others such as the preparation of fiscal reform, the Law of Regional Finance, the Law on the State Budget, the conception of the State Corporate Sector, the conditions of participation in the Economic and Monetary Union and the calendar of the Euro, see summary in Ministry of Finance Annual (1999), Lisbon, General Secretariat of the Ministry of Finance, 1998.