In practice, it means a tax increase already in 2026, with the automatic updating of the tax brackets, in addition to the reduction in rates by 0.3 percentage points (pp) between the 2nd and 5th brackets, already agreed in Parliament. The first tier rate does not change.
The update of the levels contained in the OE2026 proposal that has just been delivered to the AR does not, therefore, guarantee fiscal neutrality given the risk of it increasing for taxpayers who have salary increases greater than 3.51%. Those who start to receive more risk moving up the IRS ladder, paying more tax – which means that they could see part of their salary increase canceled due to this increase.
Since OE2025, taxpayers now have the guarantee that there will be an update of IRS levels every year with a new legal formula, in line with inflation and productivity growth and which aims toneutralize the tax effect of planned increases. But the more the bracket thresholds increase, the lower the taxation will be due to the progressiveness of the tax, tending to be.
The amendment to the IRS code that introduced the new legal formula was approved in 2024, establishing that “unless otherwise provided”, in the following year the IRS brackets are automatically updated by a coefficient that depends on inflation and productivity. And the rule is that the indicators available in the third quarter of the year before the new State Budget comes into force are used.
With this update to the tiersthe Executive is unable to guarantee fiscal neutrality to taxpayers who will have salary increases of 4.6% next year.