Lisbon, April 30, 2025 (Lusa) - Portugal was one of the 33 OECD countries where wages before income tax grew in real terms between 2023 and 2024, according to the organisation's "Taxing Wages 2024" report, which was released on Wednesday.
In the period under review, wages rose in nominal terms in 37 of the 38 countries in the Organisation for Economic Cooperation and Development (OECD) and recorded real rises (above inflation) in 33 cases.
Portugal joins the group of countries where real pre-tax wages rose. Along with Austria, Ireland, the Netherlands, and Sweden, Portugal is also among the states where the rate of tax levied on labour income (IRS) fell.
The study also indicates that the tax burden of a single worker earning the average wage fell in 2024 in most OECD countries, with Portugal being one of the three cases where this reduction was greater than 1 percentage point.
"The reduction in the tax burden for a single worker earning the average wage exceeded 1 p.p. in Finland (-1.57 p.p.), the United Kingdom (-1.74 p.p.) and Portugal (-1.75 p.p.)," says the study, detailing that while in Finland and the United Kingdom the reduction was due to a reduction in social security contributions, in Portugal this decrease is associated with a reduction in the rates levied on the first six income brackets and the updating of the brackets.
This edition of "Taxing Wages" includes a special chapter on the tax levied on labour income, taking into account its role as a source of tax revenue - in Portugal, the IRS is the second most profitable tax, behind VAT - and trying to understand the impact of tax deductions and benefits.
Although most tax systems in OECD countries include deductions and tax benefits for personal income tax, the study notes that their weight varies according to the household's profile and is generally greater in families with dependents than in single people without children.
On average, in 2024, tax benefits reduced the tax bill by around 1.9% in the case of a single worker earning the average wage, compared to a reduction of 4.7% in a couple with a single earner and two dependents and 7.3% in a single-parent family earning the equivalent of 67% of the average wage.
Deductions, on the other hand, amounted to 15.9% of taxable income for a single person earning the average wage, 21.7% for a couple (with a single earner) and two dependents and 27.7% for a single-parent family earning less than the average wage.
The results suggest that "on average in OECD countries, tax benefits tend to be more progressive than deductions, which can sometimes be regressive" since they can result in a higher deduction for families with higher incomes.
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