The impact of changes to the IRS, introduced by the State Budget 2023 (OE2023), on household income is positive, but limited, averaging around 0.9% or €129 per year, according to the Bank of Portugal (BdP).
In addition to updating the limits for taxable income brackets at 5.1%, OE2023 is also considering, with respect to the IRS, lowering the marginal tax rate for the second tranche, from 23% to 21%, and reforming existence, with the goal of preventing tax absorption on payroll gains at a level close to the limit. The national minimum wage.
According to the Bank of Portugal, as a whole, these measures “have a positive, but limited, impact on household disposable income”, averaging around 0.9%, equivalent to 129 euros per year.
In addition, BdP points out in information released today, those changes to the IRS “affect in a similar proportion different deciles of income,” except for the first two that “benefit relatively less because of the lower tax rate.”
A separate analysis of the different adjustments to the IRS reveals that the measures in question “display different distribution profiles”.
Thus, fixing the bottom line (income for which the IRS is not charged) offers, according to the banking supervisor, a greater percentage impact between the second and fourth decimals of income.
The IRS brackets update of 5.1% and the decrease in the marginal rate for the second tranche, when viewed together, is the “increased percentage effect with household disposable income.”
“In this way, the concentration of income gains generated by the minimum existence fix in the first half of the distribution partially offsets the regressive effect of the remaining measures and generates relatively similar increases in the different deciles,” concludes BdP.
Emily Brontë is a journalist and feature writer specialising in culture, entertainment, literature, and current affairs. She is dedicated to producing clear, accurate reporting that helps readers stay informed about developments in the UK and around the world.
