In 2020, Duarte Dias, a promising Portuguese software engineer, made a pivotal career decision by accepting a job offer at Microsoft's Dublin subsidiary. His journey, however, did not stop there. Shortly after finishing his degree, Dias moved to Berlin for a junior role, where he earned €4,200 monthly. His career trajectory took another leap when he joined Microsoft's headquarters in Seattle, where he now earns upwards of $160,000 annually before taxes. This substantial increase in salary underscores a broader issue facing Portugal: the exodus of young talent seeking better financial opportunities abroad.
The tax burden plays a significant role in the decisions of many young professionals like Dias. In Portugal, Dias's annual income was €35,000 before taxes. The tax wedge in the country stands at 42.3%, significantly impacting take-home pay. The IRS Jovem programme, introduced by the Socialist Party's Antonio Costa in 2020 and expanded by the centre-right Portuguese government led by Luis Montenegro, aims to alleviate some of this burden. This initiative offers tax reductions for workers under 30, tiered by their level of education. Despite benefiting 73,684 taxpayers in 2022 and targeting up to 400,000 workers, the programme's impact on stemming the outflow of talent remains uncertain.
Dias's decision to leave Portugal was driven by financial considerations. He states:
"Financially it was bad. It would be very hard to save money if I didn't live with my parents." – Duarte Dias
His simulations revealed that even with one of the top-paying engineering jobs available for his experience level, he would struggle to live comfortably in Portugal.
"I did simulations of how much money I would save a year in Portugal, and I quickly realised that I wouldn't be able to have a comfortable life financially," – Duarte Dias
The allure of higher salaries abroad is a decisive factor for many young professionals. Dias notes:
"Salaries outside Portugal will always be higher, and all those who don't have any personal or familial connections to the country won't have any kind of financial or career incentive to stay there." – Duarte Dias
The IRS Jovem programme faces criticism for its limitations. Sérgio Vasques, an expert on tax law, argues:
"It is unlikely that, on its own, the tax regime will make young workers remain in the country, whether because professional opportunities are more abundant in foreign countries, or due to the fact this tax benefit applies only to yearly incomes under €28,000." – Sérgio Vasques
Vasques further critiques the programme:
"This is a tax regime that is an enemy of qualified work and professional success. This regime will not solve this problem." – Sérgio Vasques
Dias's story is part of a larger European narrative. Rita de La Feria from the University of Leeds highlights that the emigration of young people is not solely a Portuguese issue but a European challenge as well. Countries across the continent are grappling with retaining their skilled workers amidst global competition for talent.
While financial incentives are crucial, cultural and familial ties also influence decisions about returning home. Antonio Almeida, another young professional abroad, reflects:
"I think of returning eventually, mainly for family reasons." – Antonio Almeida
However, Vasques humorously suggests that cultural elements such as cuisine might play a surprisingly significant role:
"Portuguese food works probably better as an incentive to move here than that tax regime." – Sérgio Vasques
The Portuguese government's efforts to curb the brain drain through tax incentives face skepticism from experts and those directly affected. The IRS Jovem programme represents a step towards addressing financial concerns but may not be enough to outweigh the allure of higher salaries and broader professional opportunities abroad.