Portugal looking to end its brain drain

The center-right minority government in Portugal is proposing an about-turn in tax policy, to appeal to the country's young people and end its brain drain with a decade of favorable deals to keep skills at home.

According to the country's official Emigration Observatory, out of a population of 10.4 million people, around 850,000 Portuguese people between the ages of 15 and 39, which accounts for 30 percent of all people in that bracket, have at some point gone to work overseas.

Luis Montenegro, who became prime minister in March, has said he wants to end the incentive to leave by offering young people a chance to "find an opportunity here… It's worth believing in Portugal. We are capable of doing in Portugal what we are often capable of doing abroad".

"We need young Portuguese people to seize their skills and put them to work on projects and work for the country," he said.

Finance Minister Joaquim Miranda Sarmento backed this up, saying the planned tax breaks are "a fundamental tool to meet the objective of retaining and attracting young people to Portugal".

According to the Trading Economics website, in December 2023, youth employment in Portugal in the 20-29 age group stood at 64.8 percent. In addition to high levels of unemployment, expensive housing and low wages have driven many young people abroad in search of a better life.

Portugal's average annual salary is around 20,000 euros ($21,875), and income tax rates currently range from 13 to 48 percent.

For the 2025 budget, Montenegro hopes to ditch a planned 15 percent income tax cap for the 18 to 35 age group and replace it with a sliding scale, similar to what had been planned by the previous Socialist Party government, which had a clear majority from 2022 to 2024.

For one year, those who qualify would have 100 percent tax exemption on income of up to 28,000 euros, followed by three years of 75 percent exemption, then 50 percent exemption and 25 percent up to the end of 10 years.

If the proposed budget is not approved by parliament by the end of November, Portugal may end up facing its third election in as many years.

The leader of the Socialist Party in the country's parliament has not yet announced whether it will back the proposal, but it is supported by the populist right-wing anti-immigration party Chega. However, Montenegro has previously ruled out working closely with that party.

Goncalo Matias, from the Francisco Manuel dos Santos foundation, told the Financial Times it was "absolutely critical" for the nation to stop the fl ow of talent.

"Portugal has been investing in education, but that investment is benefiting countries like France and Germany (though migration)", he said. "It doesn't make sense for a poor country like Portugal that actually benefited a lot from European funds and European solidarity to then lose that investment to the richer countries."