A new study has raised concerns that implementing the European Union’s migration and asylum pact in Portugal—without more liberal immigration measures—could lead to a fiscal crisis, forcing the country to increase taxes.
The study, conducted by researchers at Nova SBE, suggests that limiting immigration could significantly strain Portugal’s public finances. According to the authors, “Restricting immigration will lead to higher taxes, reduced public spending, a deterioration of public accounts, and potentially greater public debt, or a combination of these outcomes.”
The research evaluates the long-term impact of the European migration pact on Portugal, taking an intergenerational perspective. It warns that reducing immigration could limit the choices of future generations, as it would worsen the social security system’s financial balance in the short term, and harm pension provisions in the medium and long term.
“Should the government implement the Migration Pact in its current form, it would face a critical decision: reduce future pensions or increase transfers from the central budget to social security,” the study asserts.
The researchers project that maintaining current immigration levels would necessitate a nearly 15% increase in taxes. If Portugal were to adopt a policy of halting immigration completely, taxes would need to rise by 20%.
“There are always choices we have to make… We can either choose to raise taxes, cut spending, or take on more debt in order to impose stricter migration policies,” explained Marlon Francisco, one of the study’s authors.
The study also emphasizes the importance of continuing regular immigration flows to help alleviate Portugal’s ageing demographic trend. Immigrants, particularly younger individuals, can play a crucial role in sustaining public finances. However, the success of immigration policies depends heavily on the integration of immigrants into the labor market, which could be facilitated through low-cost measures, such as informational leaflets or a mobile app outlining rights and responsibilities.
While short-term effects of the European pact could include reduced wage pressure on lower-skilled workers, decreased housing prices, and a rise in deportations of illegal immigrants, the study highlights that these effects may be temporary. Over the medium to long term, wages will likely adjust, the housing market will stabilize, and well-integrated immigrants will have no significant impact on crime rates.
The study also predicts that the future ratio of social security recipients to contributors will increase, further intensifying the pressure on public finances within the European Union.
Marlon Francisco acknowledged Portugal’s success in integrating immigrants, especially those from Portuguese-speaking countries, citing less social tension compared to other nations. Despite growing media attention to migration issues, he emphasized that emigrants have been “net contributors” to the state rather than a burden.
“Emigrants are not a cost,” he concluded, “but rather net contributors to the state.”
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