Tax and Customs Authority
A study by the European Commission warns of the fact that IRS tax freebies in Portugal mainly benefit the richest 30%, worsening the gap between the richest and poorest.
Portugal stands out in the European Union due to the impact of “tax frees” granted by the IRS, which, instead of reducing inequalities, worsen them, benefiting especially higher income families.
This is the conclusion of a study by the European Commission, which uses the EUROMOD model to assess the effects of tax benefits in six areas, including employment, housing and family, explains .
The analysis reveals that, in the EU, tax benefits represent, on average, 16% of IRS revenue. In Portugal, however, this value reaches around 30%being surpassed only by Romania. Tax benefits granted by IRS represent around 2.1% of Portuguese GDP, behind Italy, Finland and Belgium.
Benefits in the area of employment, such as deductions for dependent and independent workers, represent 50% of the totalwhile others, such as deductions for foreign pensioners, amount to 25%.
The budgetary impact is significant: average salaries in Portugal rise by around 9% with these measures, one of the largest increases in the EU. However, the Commission emphasizes that the gains focus on the richest 30%with increases of more than 10% in their income. As a result, Portugal leads the group of six countries where tax benefits worsen inequality, measuring a 6% increase in the Gini index due to these measures.
Institutions such as the International Monetary Fund (IMF) and the Court of Auditors also warn of the risks of tax benefits in Portugal. The IMF recommends reducing these expenses to levels close to the Eurozone averagefreeing up between 0.3% and 0.6% of GDP for other needs. The Court of Auditors criticizes the lack of accounting for a third of tax benefits and the lack of justification and systematic reassessment.
The European Commission reinforces that tax benefits, in addition to being less transparent and often difficult to quantify, can distort the tax system and generate unfair competition between jurisdictions.
