Portugal: row over tax cut plans
The liberal-conservative coalition government in Portugal has presented its first draft budget to parliament. The minority government hopes to secure the support of the Socialists (PS) to pass the bill, but that party is concerned about two points in particular: a reduction in corporate income tax (IRC) and a staggered decrease in income tax rates for young professionals (IRS Jovem).
Quality of life is a key factor
It will take more than just tax cuts to prevent young workers from leaving the country, economist Ricardo Paes Mamede warns in Público:
“Even if the effect on youth employment is positive, the lack of significant improvements in salary levels and job stability will continue to fuel the emigration of young Portuguese. Indeed, international studies warn us that in addition to salaries and contractual conditions other factors are decisive: career prospects, autonomy at work, social security, access to quality housing and public services (especially daycare centres and schools for young people with children) and quality of life can be key factors when it comes to deciding whether to emigrate.”
Fear of change
Jornal de Notícias urges the Socialists (PS) to be more open to change:
“The debate on the 2025 budget focused on the PS's two red lines: the planned tax rates for young people (IRS Jovem) with concessions for top earners aimed at keeping those who represent the greatest potential for creating value in the economy in the country. And the planned multi-year reduction in corporate tax (IRC) to make the country attractive to foreign investors and allow already established companies to invest in human and other resources. When proposals are disruptive, politicians and institutions warn of the risks. Uncertainty has a paralysing effect.”
Competing in the race for talent
The Financial Times also says Portugal will need to do more if it wants to keep young talent in the country:
“Expats will want to see more evidence that Portugal's long-term prospects are improving, particularly as they could be in for a hefty marginal tax rise when the proposed reliefs disappear in their thirties. That means initiatives to cut red tape, incentivise investment and raise Portugal's burgeoning status as a hub for entrepreneurs are just as important. Portugal's plan, if it does pass through parliament, may jolt other European nations into bolder actions. ... Countries need to address a whole range of factors in their business environment if they want to win the race for talent.”