Portugal tries to stop brain drain with 100% tax breaks for young

Portugal is proposing a novel way of stemming the country's brain drain: a decade of progressive tax breaks for young people including paying nothing at all during their first year of work.

- Sam Jones

The centre-right minority government of Luís Montenegro is ditching a proposed 15% cap on income tax for 18- to 35-year-olds and replacing it with a progressive scheme similar to one supported by the opposition Socialists.

Under the plans, which form part of the country's 2025 budget, those aged up to 35 and earning up to €28,000 (£23,400) a year would have a 100% tax exemption in the first year of work, dropping to 75% from the second to the fourth year, 50% between the fifth and seventh and 25% from the eighth to the 10th year.

The average annual salary in Portugal is about €20,000 and income tax rates range from 13% to 48%. The government estimates the scheme would cost €645m in 2025, while the cap would have cost €1bn.