Portugal Slashes Taxes to Curb Youth Emigration

Portugal's centre-right government has approved a significant income tax reduction for over 300,000 young adults aged 18-35. This measure aims to deter youth emigration by lowering tax rates dramatically. The plan awaits parliamentary approval and is poised to cost the state around 1 billion euros annually.

Portugal's centre-right minority government approved a sharp income tax reduction for more than 300,000 people aged 18-35 on Thursday, lowering the average rate they will pay from next year by two-thirds to try to prevent young people from emigrating.

Prime Minister Luis Montegero said "the vast majority will pay somewhere between 4.4% and 7%-8%", while the maximum rate for all young people earning up to 5,800 euros ($6,279) a month will be of 15%. At present, income tax rates vary between 13% and 48% across salary brackets. The measure needs to be approved by parliament, where the centre-right ruling coalition that came to power after a March 10 general election has no working majority, but most opposition parties have been calling for such tax cuts, which should facilitate its approval.

"We are giving more hope to young Portuguese to settle in Portugal. We need them here... it is possible to reverse the trend (of emigration) that unfortunately worsened in the past years," Montenegro told a news conference. Montenegro said that this tax cut will cost state coffers about 1 billion euros ($1.08 billion) a year.

According to the Emigration Observatory, around 850,000 young people, or 30% of those aged between 15 and 39, have left the country - one of Western Europe's poorest - at some point and are currently living abroad, due to poor working conditions and low wages. The government will also provide young people with a public guarantee, which can cover up to 15% of housing loans worth up to 450,000 euros, since many lack sufficient savings to make an initial payment demanded by banks, and exempt them from the municipal transaction taxes.

The government had previously announced income tax cuts for the middle class worth 1.5 billion euros compared to 2023 levels. ($1 = 0.9237 euros)