Right, but there are two variables in that equation. If the economy were stronger and more productive people could earn higher salaries. Don't get me wrong, I don't like taxes either (I live in Switzerland and pay relatively low rates of income tax) but it just seems like a loser move to decide that the solution is to fiddle with the taxes, rather than figure out how to make it a place people can build a great life in, including salaries, services, fun, comfort, safety ... all the different things that are important to people.
> If the economy were stronger and more productive people could earn higher salaries
The issue is Portugal is very business unfriendly and human capital is weak.
It's hard to make the case to invest in Portugal when you can invest a similar amount in neighboring Spain and get a much better return.
Nor do local businesses earn enough to pay comparable to higher income countries in the Single Market - especially because Portugal essentially penalizes large employers
This means the only way to make up the salary differnce that is the cause of the brain drain is to decrease taxes for early career Portuguese.
Denmark and Portugal are nowhere near the same level of development, and what works for Denmark does not work for Portugal.
Exactly. So I would focus on improving that, rather than try a quick and desperate trick of tax cuts. Why not collect the taxes and then invest them wisely in great modernised services, for example?
Becuase such changes are extremely difficult and take a generation.
Easing hiring means pissing off unions, which means you piss off voters and donors.
Simplifying entry of foreign businesses and competitors means pissing off small and medium businesses, which means you piss off voters and donors.
Shrinking Portugal's notorious bloated public sector will save money, but means firing a significant number of Portuguese, which means you piss off voters.
Shrinking Portugal's notoriously large spending on social programs will save money, but means you piss off voters.
You can't just "modernize services" overnight. It requires a generation, a lot of capital, and strategy to invest in building a High Tech industry.
> Why not collect the taxes and then invest them wisely in great modernised services, for example?
Because Portugal has had an elevated debt-to-GDP ratio for almost 20 years now, which makes it extremely difficult to get the capital to do any of the above, which means a significant amount of Portugal's tax revenue is spent on servicing those debts.
The average Portuguese gets paid too little, the average Portuguese business is too small to generate significant business taxes, and every individual Portuguese person who has hireable skills has no incentive to be paid a fraction of what they would earn in London, Frankfurt, or Madrid.
Lowering taxes for early career Portuguese in order to entice them to stay until they become mid-career is the least bad option of the multiple bad options Portugal has.
PIGS Countries don't have capital available to invest in salaries / services / fun / comfort in the first place, due to historical reasons, the 2010s debt crisis etc.
So the move of bringing people and capital by available means (tax breaks) and be less hostile to startups & companies (they have been very hostile and bureaucratic historically) is one of the few things they can do, and it works.
