By now, most people here encountered the dual approach of the Portuguese to "wealthy" expats.
On one hand, the country had an open door policy with relatively easy VISAs and tax benefits. Most of the people are kind and welcoming.
On the other hand, there is growing talk about the impact of the flow of wealth to Portugal, particularly in terms of rising housing prices, but also other types of inflation, as well as on social cohesion.
On the extreme end of the spectrum, there is anger and frustration. Our social media accounts have regular comments, normally by young and frustrated Portuguese people, struggling with a low salary and a high tax burden who are envious of "the rich foreigners driving us out of our houses". Expats are occasionally requested to "please not come" or "please go home". The "please" is the best representation of the dual approach and inner conflict that the young Portuguese are feeling. Most of them are truly kind people and they are also truly upset.
This is a powerful narrative and many expats have adopted it, at least partially. Expressions of awareness to the problems caused by inequality are commonplace. But what should expat that made Portugal their home do? There is no easy answer. Some expats try to avoid the cappuccinos of the expat cafes and opt for the local Padarias and try to learn Portuguese. Others engage in heated debates on social media, demanding other expats to refer to them as immigrants, as if changing the term would somehow make the country richer. Some expats are not bothered, are perfectly happy to live in expat-land and don't think of it too much.
FRESH Portugal is a firm with a team made of expats and Portuguese. We work with a large number of expats, many of them "wealthy" by Portuguese standards. So, we find ourselves in the heart of the debate. We would like to propose our perspective and the different and better path that we believe expats and Portuguese should be taking together.
Let us start at the beginning - a world where people can move to a different country to change their lives for the better is a better world than one where people are landlocked. Nearly every successful country in the world has taken advantage of the energy, passion and attitude of migrants. Nearly any failing country is one where immigration is not welcome.
More specifically, those who believe that "wealthy" expats should leave have it completely wrong and clearly haven't been paying attention. Portugal is and have been a poor country that have been on the verge of financial collapse a couple of decades ago. Its population is aging. The healthcare system hardly holds. The country does not have a well-developed and diverse economy. The country needs young people - locals and foreigners. Young people work and contribute and support the older population. Every Portuguese government, left-wing or right-wing acknowledge this basic fact.
Those who believe that tax benefits for expats are a mistake also have it wrong. The tax system in Portugal is designed around the low salaries that reflect the economic conditions. Since it is progressive, nearly every "wealthy" expat would get caught in the highest tax band. The vast majority of such expats are generating income overseas. This means that Portugal had not educated these people, had not supported their healthcare and is not responsible for their salaries, but it benefits from the tax intake. It is net gain to Portugal. the typical "wealthy" expat pays into the Portuguese economy at least 10 times more than the average Portuguese, tax benefit taken into account. The normal tax rates in Portugal are unsustainable to people with these types of salaries. Portuguese who have these salaries leave and expats with these salaries will not and to not come. Saying "don't come" is easy, but the money is needed and supports hard-working Portuguese people and their family members.
Furthermore, the contribution of expats is likely overrated. Expats purchase approximately 10% of properties in Portugal, many of them not in competition with average Portuguese since the properties are luxury properties that wouldn't have been built in the first place if not for the expat demand. More importantly, Lisbon alone has over 40,000 abandoned properties and the same is true for other cities. These properties do not belong to expats and are usually the outcome of bureaucracy and inheritance disputes within Portuguese families. Releasing these properties to the market would have likely solved the housing crisis, yet, there is very little discussion about those properties and expats are blamed for the entire problem. There are a lot more abandoned properties than properties used as AirBNB, yet AirBNBs (or ALs as they are locally called), which bring tourist who invigorate local businesses and support the largest sector in the Portuguese economy, are constantly under attack. Those English speaking "rick" foreigners are an easy target indeed.
That all said, there is no doubt that expat demand is responsible, particularly in Lisbon, Porto and the Algarve, to some of the rise in housing prices, as well as other prices.
There is therefore some merit in suggesting that expats have some responsibility to rising prices, but this should be balanced against the benefit that they bring in consumption and taxes. Populists tend to take a complex subject and over-simplify it, but the reality is more complex and nuanced.
Assessed on logic alone, the previous prime minister, no friend to expats, described the tax benefits system (NHR) as a goose that lays golden eggs just a few months before cancelling it. The plan was clearly good, from a logical perspective, to Portugal and the Portuguese, attracting "the brightest and the best" - people who want to make Portugal their home and come with good intentions and open hearts.
However, logic alone cannot explain emotions and the issue should be looked at emotionally and not only economically. Sure, expats are contributing to the economy, but still, for a young person with a small salary and high tax rate, the constant reminder that there are people around who earn a lot more and pay lower taxes can be painful. Smart young Portuguese are leaving Portugal to seek better fortunes whilst expats are coming in. That does not instill positive feelings in the parents of these talented young people. Many Portuguese are struggling and they see expats as fortunate and ungrateful. We have to be honest and acknowledge that human beings have emotions and feeling jealous is legitimate. We must not silence the voices calling for fairness. Fairness is not only economics. It is also a fair society with solidarity between its members.
This leads us to looking for the root cause of the real problem, as well as to what expats can do differently.
There are two serious issues concerning expat integration in Portugal.
The first serious issue is that Portugal has almost no quality jobs.
Salaries are low not only because taxes are high but because the output of people is minimal in the tourism and construction sector. To have higher output, Portugal needs more advanced industries and more than any other industry, it needs a thriving tech industry. There has been a lot of discussion about the growth of Portugal as a tech hub, but from our experience, it is mostly hype. The industry is at its infancy and the ecosystem is lacking - there are few jobs, few real companies building real products, not enough talent and not enough capital.
Interestingly, the behaviour of the Portuguese talent and that of expats is not very different and the problem of the absence of quality jobs that pay well is the same for everybody. Very few "wealthy" expats come to Portugal to work in or create Portuguese companies. They keep their jobs overseas and only "live" in Portugal. Interestingly, this is true for Portuguese in the tech sector as well. Due to the pay gap between the tech sectors of Portugal and other countries, the most talented Portuguese who live in Portugal may well be freelancing for overseas companies.
The lack of quality jobs is one of the primary reasons that expats are an almost separate society. Expats almost never work in Portuguese companies. Instead, they wake up, work in their remote job and do not engage deeply with colleagues who live next to them. Add an excellent international schools network and many other institutions catering for expats, and it's pretty much a separate life and a different country - not Portugal, but Exportugal. In most countries that have large migrant population, people integrate by joining the workplace. In Portugal, in the absence of workplaces to join, people do not integrate.
Whilst many Portuguese people see this as privileged life, they fail to realise just how lonely it is to be part of this community. Many of the expats leave after a few years and go back to their home countries. If expat life is so privileged, the leavers weren't so many. The Portuguese may work in jobs that do not pay much and suffer under a high tax burden but they have large and supporting families and circles of friends. They may not have much money, but they have something more valuable - deep meaningful relationships. Expats who live in silos may have more money, but after some time, the effects of the great weather and nice beaches starts fading and many realise that they are lonely and end up leaving.
There is, therefore, a strong mutual interest between the Portuguese and the expats for deeper, more meaningful, integration. Portugal needs the knowledge, expertise and capital of expats. Expats need a warm embrace of a new society and to be able to put real roots down, rather than artificial ones.
Such meaningful relationships can happen in many places but the most important place is the workplace.
This leads us to the second serious issue - the expat system in Portugal was designed for remote workers and completely fails to encourage expats to create businesses in Portugal and create meaningful and well-paying jobs.
Encouraging remote workers to come to Portugal is a sensible first step in the absence of quality jobs. It should have been, however, the first step. Once the remote workers are already in the country, the next step must have been to encourage remote workers to abandon their remote job and create strong and sustainable businesses within Portugal.
Instead, Portugal has done the opposite. Starting a business in Portugal is expensive, hard and slow. Taxes are high. With the NHR exempting only foreign sourced income, incorporating in Portugal is punitive. Incentives to invest in Portuguese businesses are effectively non-existent. Add to that a shortage in quality services, many service providers who take advantage of expats and no proper regulation that enforces accountability.
In other words, expats are not only not encouraged to create wealth for everyone within Portugal. They are deterred from doing so by a system that penalises enterprise and wealth creation.
This leads us to the second serious issue - the expat system in Portugal was designed for remote workers and completely fails to encourage expats to create businesses in Portugal and create meaningful and well-paying jobs.
