Portugal among highest EU top tax rates

Portugal was one of the countries in the euro area which most increased the amount of IRS tax paid by top earners between 1995 and 2023.

In a document released this month by the EC’s Directorate-General Taxation and Customs Union (DGTAXUD), it was noted: “There was a fall in the taxes charged in maximum tax brackets at a European Union and Member State level except for Greece, Portugal and Lithuania” — although in the latter case the tax ceiling was already set low.

In effect, in 1995 the maximum tax bracket was 40%, the percentage levied on high income earners until 2006 when Portugal hiked it to 42%.

In 2010, it rose to 45.9% and hit a record maximum in 2013 when the Finance minister was Vítor Gaspar and the top rate was 56.5%.  Gaspar himself admitted the increases were “enormous”.

The top tax rate continued at 56.5% until 2018 when it fell to 53% and now stands at 48%. In the European Commission’s definition the maximum tax ceiling on income also includes extraordinary taxes, which in the case of Portugal includes, for example, a surcharge on solidarity of between 2.5% and 5% for incomes over €80,000 per annum.

According to the EC, 1% of Portugal’s richest citizens hold one-quarter of the country’s wealth or 25.8%. The euro area average was 25.6%.

DGTAXUD sates that Portugal is one of the countries where the tax burden — measured by the impact of tax revenue on GDP – has increased significantly since 2012 and will continue to increase.

“The ratio of taxes on GDP should fall significantly in several countries by 2024 (18 member-States), particularly Denmark (6.2%), Slovenia (2.9%) and Greece (2.5%). However, “the tax burden will be higher in Cyprus (1.3%), Romania (0.9%), Portugal (0.5%), as well as Belgium and Hungary (0.4%) in 2024.

However, the Portuguese tax authorities are among the most efficient in collecting taxes on IRS and IRC as well as overall tax administration. According to the EU tax directorate “an efficient tax authority is one that makes a timely calculation and payment of taxes.

Because of its digitalisation and online processes, ease of payments via multichannel platforms, and pre-filled tax forms Portugal has reduced the burden for taxpayers when it comes to meeting their fiscal responsibilities, which makes Portugal one of the most efficient counties in tax declarations and collection.

Portugal, Spain and Denmark are the “only member States to have developed pre-filled tax declarations” for the three types of taxes analysed by Brussels.