Work remains more taxed than before the Troika
The tax burden on labor in Portugal has fallen since the maximum recorded in 2023, but remains clearly above levels prior to the Troika intervention and also the average for OECD countries.
According to OECD data, the so-called tax wedge — indicator that measures the combined weight of IR and Social Security contributions paid by workers and employers on the average salary — reached 41.4% in 2023. In 2025, this value fell to 39.3%, which represents a reduction of 2.1 percentage points in two years.
Despite this drop, Portugal maintains a tax burden on labor that is much higher than that recorded before the period of financial assistance. Between 2000 and 2010, before the Troika’s intervention, the Portuguese average was 36.6%. In other words, even after the recent reduction, the tax wedge in 2025 it remains 2.7 percentage points above the pre-Troika average.
The most significant worsening occurred precisely during the years of financial assistance, between 2011 and 2014, when the country adopted a set of fiscal consolidation measures that increased taxation on labor income. What began as a response to a financial emergency ended up extending over time, becoming a new fiscal level. The series shows that, despite some fluctuations, Portugal never returned to pre-crisis levels in a sustained manner.
The international comparison is also unfavorable. In 2025, the tax wedge Portuguese rate was 39.3%, while the OECD average was 35.1%. The difference, of 4.2 percentage points, shows that work in Portugal continues to face heavier taxation than that seen, on average, in developed economies.
This fiscal burden has relevant economic consequences. A high workload reduces families’ disposable income, limits the ability to save and consume, increases hiring costs for companies and can hinder job creation. It also makes net salary progression more difficult and reduces the country’s competitiveness in attracting and retaining talent.
The decline observed since 2023 is therefore positive. But the data shows that it does not yet represent a structural reversal. Portugal continues to have a higher tax burden on labor than in the pre-Troika period and above the OECD average.
- Facts viewed through a magnifying glass by André Pinção Lucas e Juliano Ventura – A partnership between POSTAL and the Institute
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