Autoridade Tributária Study Charts Portugal's Gini Coefficient Spike From 42.36 to 45.87 Across 2020-2022 as the IRS Kakwani Progressivity Index Hits a 2017-2022 Series Low at 0.2917

A peer-reviewed study published in the Autoridade Tributária's (Tax Authority — AT) own journal Ciência e Técnica Fiscal has charted a sharp rise in Portuguese income inequality during the closing years of the António Costa-led Socialist governments, even as successive Orçamento do Estado (State Budget) cycles introduced changes to the Imposto sobre o Rendimento das Pessoas Singulares (Personal Income Tax — IRS) designed to lighten the fiscal load on families and reinforce progressivity. The paper, titled Avaliação da Efetiva Progressividade do Imposto Sobre o Rendimento das Pessoas Singulares, was authored by researchers Alexandra de Andrade Dias Arsénio, José Maria Pires and Luís Silveira Santos.

The empirical base is unusually deep. The authors worked from nearly 32 million IRS declarations filed with the AT between 2017 and 2022 — the bulk of the entire Portuguese taxpayer universe across the six-year window. The headline finding: distribution improved modestly in the first half of the period and then deteriorated sharply. The Gini coefficient — the international benchmark measure of inequality, where higher values mean greater dispersion — fell from 43 points in 2017 to 42.36 in 2020 before rebounding to 42.65 in 2021 and spiking to 45.87 in 2022, the highest reading of the whole series.

Two specific income-share moves carried the rebound. The bottom half of taxpayers, with average gross monthly earnings around €980, held 21.52% of total declared income in 2020; by 2022 that share had slipped to 19.98%. The top 5%, with gross monthly earnings above €3,500, moved in the opposite direction, climbing from 18.68% of total income in 2021 to 22.63% in 2022 — an unusually rapid concentration over a single fiscal year. "Portugal continues to sit inside the group of EU member states with the highest inequality levels," the authors write, listing Bulgaria, Latvia, Lithuania and Italy as peer comparators.

The IRS itself stayed nominally progressive throughout — the Kakwani index, a standard summary measure that captures the gap between the tax-burden distribution and the pre-tax income distribution, was positive in every year of the series. But the index slid from 0.3072 in 2017 to 0.2917 in 2021, the lowest value of the window, before recovering only partially to 0.2980 in 2022. In plain terms, the redistributive lift the IRS adds on top of market incomes weakened in precisely the years when market inequality widened.

The 2021 and 2022 readings — when the IRS lost progressivity — coincided with two finance ministers from the Costa governments. João Leão, who succeeded Mário Centeno mid-2020, held the portfolio in 2021; Fernando Medina took over in March 2022. The 2021 Orçamento do Estado updated bracket thresholds by roughly 0.7%, maintained the splitting of the lowest two brackets and introduced the IRS Jovem (Youth IRS), a partial tax exclusion for graduates under 26 in their first five years of activity. The 2022 draft — rejected by Parliament and triggering the early election — had proposed expanding the bracket structure from seven to nine bands, a change later legislated by the absolute-majority Costa government with Medina at Finanças.

The authors are careful on causation. They do not attribute the inequality rebound to the IRS reforms and do not assess each measure in isolation. What the data establish, they write, is the temporal coincidence: progressivity fell to its series low precisely as the Gini reading climbed to its series high — a pattern policy-makers preparing the next Orçamento do Estado will need to reckon with.