Abstract:
This paper assesses the fiscal and distributional effects of personal income tax expenditures in Portugal using EUROMOD and 2022 EU-SILC microdata. We compare the 2023 tax-benefit system with a counterfactual scenario in which tax expenditures are removed to estimate first-round impacts. We find that tax expenditures account for almost 40% of personal income tax revenues and predominantly benefit middle- and higher-income households, with large variation in redistributive effectiveness across instruments. While the Net Minimum Income Guarantee is progressive and cost-efficient in reducing inequality, most work- and pensionrelated allowances deliver limited equity gains, suggesting scope for reform.
