Portugal is expected to collect approximately €14 million more per day in taxes and social security contributions in 2027, according to projections included in the State Budget.

The increase represents an additional €5.1 billion in annual revenue, despite the Government’s commitment to lowering taxes.

According to the Jornal de Notícias, as reported by Executive Digest, the increase is largely attributed to economic growth, higher consumption, inflation, rising wages and employment.

Finance Minister Joaquim Miranda Sarmento has maintained that the Government is reducing the tax burden, highlighting €5.2 billion in tax reductions approved since April 2024.

Although tax revenue is expected to increase, its share of Gross Domestic Product (GDP) is projected to decline from 24.1% to 23.8%.

Including social security contributions, the overall tax burden is expected to remain close to 35% of GDP.

VAT and income tax revenue to increase

Total tax revenue is projected to rise from €78.3 billion to €80.9 billion in 2027, representing an increase of approximately €2.6 billion.

Value Added Tax (VAT) is expected to account for a significant proportion of this growth, generating an additional €1.5 billion and bringing total revenue to more than €30 billion.

The increase is linked to higher consumer spending and inflation, with private consumption expected to grow by 2.1% and inflation forecast at 2.3%.

Even without changes to VAT rates, higher prices and increased spending can generate additional revenue.

Personal Income Tax (IRS) is also expected to generate an additional €679 million, despite adjustments to income tax brackets of 3.88%.

The Government anticipates employment growth of 1.4% and an increase in average wages of 4.5%, contributing to higher taxable income.

Social security contributions are projected to increase by approximately €2.5 billion, reaching €38.3 billion.

Fuel and tobacco taxes generate additional revenue

The Government forecasts an additional €186 million from the Tax on Petroleum and Energy Products (ISP), alongside increases of €22 million from Vehicle Tax (ISV) and €23 million from the Single Circulation Tax (IUC).

Stamp duty revenue is expected to rise by €142 million to €2.5 billion, representing an increase of 6.1%, and tobacco tax revenue is also projected to increase by 8.1%, generating an additional €139 million.

However, some taxes are expected to generate less revenue. Corporate Income Tax (IRC) receipts are projected to decline by €99 million as the standard rate falls from 19% to 18%. Municipal Property Tax (IMI) and Property Transfer Tax (IMT) revenues are also expected to decrease by approximately €149 million combined.

Overall, the projections indicate that economic activity, employment and inflation will continue to increase government revenue, even as certain tax rates are reduced.

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