Portugal’s real wages declined by 3.5% in 2022, according to the Organisation for Economic Cooperation and Development (OECD) rankings.

Nominal average salaries rose in all OECD nations last year but dipped in real terms in 35 of the 38 member states. 

Salaries in Portugal increased on average by 4.5% in 2022, the value of which was impacted by inflation, resulting in a real pre-tax salary reduction of 3.5%, says the OECD’s ‘Taxing Wages 2023’ report published on Tuesday.

In terms of real salary declines, Portugal ranked 19th out of 35 countries. The largest falls were registered in Estonia (10.0%), Turkey (8.8%), the Netherlands (8.3%), the Czech Republic (7.0%), Mexico (6.8%) and Lithuania and Latvia (6.3% and 6.2%, respectively).

Regarding the tax burden on labour income, the OECD report states that it rose in 23 countries, Portugal being one of them, for the majority of households and incomes reviewed.

The increase in the tax burden is due to a rise in average wages and the progressive tax rates on labour income, according to the findings. In addition, another reason “was driven” by the fact that “a greater proportion of income became subject to tax” as a result of reduced tax benefits and deductions.

Furthermore, Portugal came in 9th place last year out of the 38 member states with the highest tax burden on average workers, reaching 41.9%, representing a 0.06% rise over the year before.

Despite the fact the report states the tax burden rose for the majority of households and incomes between 2021 and 2022, it shows “that the greatest increases were observed in families with dependents, especially those with lower incomes.”

The OECD went on to add that these findings “reinforce the importance of policies to mitigate fiscal aggravation,” whereby the tax burden rises due to the insufficient adaptation of tax systems to inflation.