The impact of changes to the IRS, introduced by the state budget for 2023 (OE2023), on household income is positive but limited, averaging around 0.9% or 129 euros per year, according to the Bank of Portugal (BdP).
In addition to updating the limits of the taxable income brackets by 5.1%, the OE2023 also considers, as far as the IRS is concerned, the reduction of the marginal tax rate of the second bracket, from 23% to 21%, and a reform of the existence , with the aim of preventing salary gains close to the national minimum wage from being absorbed by the tax.
According to the Bank of Portugal, these measures as a whole have “a positive but limited impact on households’ disposable income”, about 0.9% on average, equivalent to €129 per year.
In addition, the BdP indicates in information released this Friday, those changes to the IRS “affect the various income deciles in a similar proportion,” with the exception of the first two “which benefit relatively less due to the low incidence of the tax ” .
The separate analysis of the various amendments to the IRS shows that the measures in question “show different distribution profiles”.
For example, the reform of the subsistence minimum (income on which no IRS is levied) has, according to the banking regulator, a larger percentage effect between the second and fourth income decile.
The 5.1% update of the IRS scales and the reduction in the second scale marginal rate, taken together, have “a growing percentage effect on households’ disposable income”.
“In this way, the concentration of income gains generated by the subsistence reform in the first half of the distribution partially offsets the regressive effect of the remaining measures and generates proportionally comparable increases in the different deciles,” concludes the BdP.
Source: DN
