Portugal’s Government Offers 100 Percent Tax Cuts to Under 35s in Effort to Decrease Emigration

October 14, 2024 TruthUSA

Approximately 850,000 individuals aged 15 to 39 have chosen to leave the country due to inadequate wages and unfavorable working conditions.

Portugal’s center-right minority government is responding to the youth exodus by proposing a 100 percent tax exemption for individuals aged 35 and below, aiming to discourage emigration.

The government’s first budget bill introduces this initiative, offering a 100 percent tax break in the first year of work for individuals under 35 earning up to 28,000 euros (around $30,500) annually. This exemption gradually reduces to 25 percent between the eighth and tenth years, potentially impacting over 300,000 people.

According to the Emigration Observatory, around 850,000 people aged 15 to 39, roughly 30 percent of this demographic, have departed the country and are now residing abroad due to poor working conditions and low wages.

Finance Minister Joaquim Miranda Sarmento stated in a news conference, “This budget aims to reduce taxes for families, youth, and companies, while also encouraging economic growth and investment. It represents a conservative macroeconomic strategy, highlighting the enormous potential of the Portuguese economy.”

The Democratic Alliance coalition, which narrowly won the March 10 election over the Socialist Party, must secure their support to pass legislation. Failure to pass the budget could lead to a government collapse.

The Democratic Alliance has rejected the possibility of collaborating with Chega, the anti-immigration populist party, now the third-largest political entity in Portugal with 50 lawmakers, quadrupling its parliamentary representation.

The youth tax exemption policy was proposed in May by Portuguese Prime Minister Luís Montenegro, who expressed the need to create more opportunities for young Portuguese individuals to stay in the country, thereby reversing the trend of emigration.

Montenegro mentioned that this tax cut would cost the state approximately 1 billion euros ($1.09 billion) annually.

Portugal is categorized as one of Western Europe’s poorest nations, with many workers earning less than 1,000 euros ($1,090) per month.

According to Eurostat, 20.1 percent of the Portuguese population was at risk of poverty in 2022. In comparison, the EU countries with the highest risk of poverty in 2022 were Romania (34 percent), Bulgaria (32 percent), Greece (26 percent), and Spain (26 percent).

Lisbon, Portugal’s capital, has become financially challenging for many young Portuguese owing to low wages and steep rents.

In August 2022, Lisbon surpassed Milan, Madrid, and Barcelona as the costliest capital in southern Europe to purchase a home, according to the European real estate data platform Casafari. Rental prices rose by 23.2 percent during the same year.

The average age at which individuals in Portugal move out of their parents’ home is 33.6, the highest within the European Union, as per Eurostat data.

Immigration

In 2020, Portugal observed a fourth consecutive year of population growth, mainly attributed to a larger number of arrivals than departures. There were 67,160 immigrants arriving compared to 25,886 leaving, resulting in a minimal overall growth of 0.02 percent.

Under the previous socialist government’s tenure from 2015 to 2023, Portugal maintained one of Europe’s most accommodating immigration policies, offering pathways for illegal immigrants to regularize their status through job offers.

In 2023, the foreign population in Portugal exceeded 1 million, surpassing the 2018 figure of 480,000.

Montenegro emphasized, “We require individuals in Portugal who are willing to contribute to building a more equitable and prosperous society. However, we cannot have completely open doors.”

Under the new regulations, immigrants must secure job contracts before relocating to the country, with priority given to qualified professionals, students, individuals from Portuguese-speaking countries, and those seeking family reunification.

This report includes contributions from Reuters.

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