On the non-habitual resident status: more retirees and less “creative” than hoped?

I recently posted a description of the incentives created by the Portuguese government to attract migrants and returnees.

One mechanism in particular is the target of parliament members in particular and the public in general: the non-habitual resident status. Quick reminder: if you have lived outside of Portugal for the last five years, and you now live more than 182 days per year in the country, you can lower your income tax to a flat 20% rate, and this during 10 years. The main objective of this mechanism is to attract both high-skilled workers and retirees (and this is stated in official documents issued by the tax office). 

But, as I enter the teachers’ room for my lunch break last week, Público’s front page reads: Tax bonus only attracted 8% of brains to Portugal. As a matter of fact, among the 27.367 beneficiaries, there are 2140 “brains”: 1024 are senior management workers in private businesses, 384 engineers, 170 high-tech workers, 80 researchers, 50 IT programmers, 48 professors, 45 fiscal consultants, 42 designers… and “at the end of the table”, says the journalist, seven singers, six musicians, five painters, four psychologists, two sculptors, a surgeon, a dentist and a paediatrician.

Beside the fact that this is certainly an entertaining list to go through, the rest of the article points out that the major part of beneficiaries have no “added value” jobs (although one could argue with that definition…) or are retirees. In this last case, Portugal provides a 0% tax on retirement benefits, and the possibility to pay taxes on foreign pensions only in Portugal. This has had the effect to piss certain countries which see it as competition.I am now curious to see how retired returnees from the rest of the EU use this. So far, I understood that not everybody is aware of these entitlements (which may explain the low number of beneficiaries… 27.367 is not much compared to the official numbers of migrants and returning migrants).

And after I read this article, I attended a conference organised on 27 February by ISCTE, entitled Jornadas de Sociologia – Pensar o Futuro. The conference focused on demographic challenges and regional disparities. A panel addressed the issue of migration and demography. The three speakers (Daniela Craveiro, Catarina Reis Oliveira and Rui Pena Pires) showed that in fifty years, due to a weak birth rate and a negative migration balance, Portugal will loose 2 million nationals at least, and host 40% of seniors. They therefore ask, is migration a solution? While Craveiro shows that 600.000 migrants per year would be necessary to compensate the loss of actives; Reis Oliveira wonders if attracting migrants would not end up in succeeding in attracting elderly and therefore, would not resolve the demographic loss. 

I am not so sure what to think of all this. Is it really bad that retirees want to spend their old days in Portugal (and pay no income taxes)? Do you have to be a “brain” or a member of the “creative class” to be productive and to make parliament members happy? Are they happy about the right things? Do we need to make them happy at all?    



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