IRS absorbs an increasing share of salary
The tax burden on labor has increased in Portugal over the last two decades. The comparison between the effective IR rate applied in 2025 and that applied to equivalent income in 2003, adjusted for inflation, shows that taxpayers currently hand over a greater portion of their income to the State at all salary levels analyzed.
Considering the case of a single worker without children, a gross monthly base salary of R$1,000 is subject, in 2025, to an effective income tax rate of 7.6%. In 2003, for an income with the same purchasing power, the effective rate was 6.1%. This is an increase of 1.5 percentage points, the largest relative increase among the ranges considered.
The trend is repeated in intermediate incomes. A gross monthly salary of R$1,500 went from an effective rate of 11.9% to 12.4%. For R$2,000, the rate went from 14.9% to 15.6%. At R$2,500, effective taxation rose from 18.5% to 19.0%. There are also increases in the 3,000 and 4,000 euros per month, although more moderate, rising respectively from 21.1% to 21.5% and from 24.3% to 25.2%.
At higher salaries, the tax burden also increased. A gross monthly income of 5,000 euros currently supports an effective IRS rate of 28.1%, above the 26.9% recorded for the equivalent amount in 2003. For 10,000 euros per month, the effective rate went from 33.2% to 35.7%, corresponding to the largest increase in absolute terms among the brackets analyzed.
The data shows that the evolution of IR did not just follow inflation. Despite successive legislative changes and updating of brackets over the years, effective taxation on work has become heavier for all income levels considered.
Another relevant conclusion is that the biggest increases occurred at the extremes of the salary distribution. Both workers with lower incomes and those with higher incomes registered the most significant increases in the effective IRS rate. This means that, regardless of salary level, a greater portion of the income generated by work is now channeled to the State through this tax than was the case around twenty years ago.
In a context where real wages continue to be one of the main challenges of the Portuguese economy, these data help to understand why many workers feel that an increasing part of the earnings obtained through their work do not translate into disposable income.
- Facts viewed through a magnifying glass by André Pinção Lucas e Juliano Ventura – A partnership between POSTAL and the Institute
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