Portugal is making headlines with its new initiative aimed at retaining young talent and attracting foreigners. The government plans to slash taxes for individuals aged 35 and under, hoping to curb emigration and stimulate the local economy. This move comes as part of a broader budget proposal presented by Prime Minister Luís Montenegro‘s center-right government.

Under the proposed tax plan, young individuals earning just under €20,000 currently face a 26% tax rate on income exceeding €16,500. The new initiative aims to alleviate this burden significantly. Here’s how it breaks down.

This initiative is a collaborative effort between Montenegro’s government and the Socialist Party, which initially proposed the idea earlier this year.

Prime Minister Montenegro has expressed a strong commitment to reversing this trend, stating that his government aims to provide young people with the future they deserve. He emphasized the need for young Portuguese to utilize their skills within the country.

Youth Minister Margarida Balseiro Lopes acknowledged the financial implications of the tax cuts, estimated to cost €650 million. However, she argued that the long-term cost of losing a highly qualified generation would far exceed this expenditure.

The proposed budget, which includes these tax cuts, is set for a parliamentary vote on October 31. The outcome remains uncertain, as it requires either abstention from the opposition Socialists or support from the far-right Chega party. Failure to pass the budget could lead to the collapse of Montenegro’s government, which has only been in power since April after a series of snap elections.