Brain drain in Portugal to be tackled by tax breaks
Portugal will hope to slow the nation’s brain drain by offering a decade of progressive tax breaks to young people. The proposals would see them paying nothing during their first year of work. The centre-right minority government under Luis Montenegro is scrapping a proposed 15% cap on income tax for 18 to 35 year olds, instead replacing it with a progressive scheme, similar to that supported by the opposition.
Under the proposal, part of the 2025 budget, young people earning up to €28,000 (£23,500) would get a 100% tax exemption during their first year of work. This would fall to 75% until their fourth year, 50% during their fifth, sixth, and seventh year, and down to 25% until their tenth year of work.
The government hopes that this would help between 350,000 and 400,000 young people. The country’s annual salary is around €20,000 with income tax rates ranging from 13-48%. The scheme would cost €645 million in 2025, the government estimates, but the cap would cost €1 billion.
The incentive hopes to tackle a brain drain of young people in the country of 10.4 million people. The Emigration Observatory, estimates that 850,000 young people or just under a third of those aged 15 to 39, have left the country at one point and chosen to live abroad because of low wages and poor working conditions in Portugal.
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From 2008 to 2023, an estimated 361,000 people aged between 15 and 35 left the country, accounting for two-thirds of all emigrants in that time. Portugal is not the first to consider an age-based tax incentives to slow a brain drain down. In 2019, Poland cut income tax for anyone under the age of 26 and Italy had a tax reduction scheme for both returning employees and the self-employed. In 2015, Hungary’s Prime Minister Viktor Orbán even tried to lure young people back to Hungary with free flights.
“It’s worth believing in Portugal,” the prime minister said in August. “We are capable of doing in Portugal what we are often capable of doing abroad.”
Shortly before he took office, Montenegro said that his government has “the confidence of the voters”, adding: “It also has what is required of all political players, including those now in opposition – that is a sense of responsibility.” Tackling the brain drain is one of his government’s priorities.
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