OECD: Portugal takes 27.4% in tax
According to the OECD, Portugal continues to be among the countries that charges most income tax and social security contributions in advanced economies worldwide.
In 2020, a Portuguese employee with an average salary, but without children, took home 72.6% of their gross salary and the State took 27.4% in IRS income tax and TSU social security contributions.
The statistics were published by the Organisation for Economic Cooperation and Development ( OECD) on Thursday in its report “Taxing Wages 2020” which calculates the tax burden on work in the advanced economies across different income and family categories.
These values for last year show an increase in the tax burden on work in Portugal in line with tax charges in Portugal in 2019 when the tax burden reached a new record.
In 2019, Portuguese workers paid on average 26.9% of their gross income to the State, taking home 73.1%. The tax burden on work had increased.
The OECD calculation only takes into account retained tax at source applied to the gross salaries of employees in Portugal, excluding an adjustment of IRS which is made the following year, and which, in some cases, leads to a lower tax bill and a refund.
The 27.4% of gross income taken by the state is divided between 16.4% for IRS (income tax) — the monthly percentage applied to the average salary in Portugal – and 11% for the contribution towards social security contributions which is the same for all workers.
These values are above the OECD average on labour income which is 24.9%, divided between 15.1% for IRS and 9.7% for social security.
Therefore, Portugal comes in at number 16 in the list of OECD countries with the highest tax rates, situated close to the average and almost in the middle of the table of the 37 countries in the organisation’s ranking. The country on the list with the highest tax rates was Germany with 39.9% and the lowest was Colombia with 0%.
Portugal came in at 11 as the OECD country state which retained the largest slice of workers’ income. The country with the largest tax burden on work is Belgium (51.5%) followed by Germany (49%), Austria (47.3%), France (46.6%) and Italy (46%). The Czech Republic was 43.9%, Hungary (43.6%), Slovenia (42.9%), Sweden (42.7%) and Lithuania (41.8%).