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Foreign Immigrants: problem or solution for the balance of the Portuguese Social Security System?

24 de April, 2019

Foreign Immigrants: problem or solution for the balance of the Portuguese Social Security System?

Reading: 5 min

The issue of Social Security has been widely discussed in several countries. Essentially, the main concern revolves around the sustainability of this system, in view of factors such as the aging of the population and the low birth rate. It has been no different in Portugal: it is a recurring and extremely important issue, whose possible solutions also involve attracting immigrants to the country.

In this sense, the annual report of the Migration Observatory (OM) 2018 itself, which points to the well-known drama that Portugal is experiencing with its ageing population, the evasion of national labour and low birth rate, highlights in surplus figures how much foreigners (especially Brazilians) have contributed to the balance of the Portuguese Welfare System.

Were you curious? Follow the clipping that we have made following these official data and understand why it is unlikely that Portugal will adopt an anti-immigration policy in the near future, at least from a perspective of social security intelligence.

The presence of foreigners can help bring balance to the Portuguese welfare system.

1. Foreign citizens in Portugal: ability to contribute

In 2017, 421,711 foreign citizens resided in Portugal, representing 4.1% of the total number of residents in the country.

According to the analysis compiled by Observatório das Migrações, the relationship between taxpayers and the Portuguese Social Security System, by total residents, has a more positive balance for foreigners than for total residents.

In other words, official data indicate that foreigners have a greater capacity to contribute than nationals and are essential to support the sustainability of the Portuguese social security system.

Do you know how to ensure your tax compliance in Brazil and Portugal? Find out here.

2. Are foreigners attracted to more generous social protection systems?

Not necessarily. Official data allow for the deconstruction of the idea that the immigrant is attracted to more generous social protection systems.

According to the International Labour Organization (ILO, 2014), Brazil (21.3%) and Argentina (21.1%), for example, spend more, as a percentage of Gross Domestic Product (GDP), on social protection than most American countries, including Canada (18.6%) and the United States of America (19.9%), which have become the main magnets for immigrants, for example.

3. Deficit or Surplus in the Portuguese Social Security System?

Following the trend of the last 10 years, in Portugal, the relationship between the contributions of foreigners and their counterparts in the Portuguese social security system – the social benefits they receive -, in the reference years of the OM studies, continues to translate surplus, registering in 2016 at +418.5 million euros and in 2017 at +514.3 million euros.

It was also observed that the balance obtained in 2017 reached values never before recorded, since the beginning of this 21st century, even in years of economic crisis in which the beneficiaries of social protection increased.

On average, during the last 10 years, foreigners have “used” only 15% of what they contribute to Social Security.

Therefore, foreigners clearly contribute proportionally more than they benefit from Portugal’s social security system, which makes their participation very important for the sustainability of the Portuguese social security system, thus benefiting the Portuguese themselves.

INSS Brazil for Retirement in Portugal: see how to use it.

4. The importance of Brazilian taxpayers

The analysis of data based on the nationality of taxpayers, in turn, showed that in 2016 and 2017, continued to stand out among foreign taxpayers: the Brazilian nationality.

In these periods, Brazilians accounted for 21.7% and 24.7%, respectively, of total foreign taxpayers. This is the most numerically represented foreign nationality in Portugal.

And in this scenario, maintaining the same trend as in other years, the nationalities that most contributed to Portuguese Social Security, in order of importance, were: the Brazilian – representing 17.6% of total contributions paid by foreigners in 2016 and 19.3% in 2017, followed by Spanish nationality (9.4% and 9.1%, respectively).

Portuguese citizenship: who has the right and how to acquire it.

Let’s repeat here: Brazilian nationality represents 17.6% of the total contributions paid by foreigners in 2016 and 19.3% in 2017.

The table below, extracted from the 2018 Statistical Report of the Migration Observatory, shows the amount of Contributions (declared/paid) according to the main foreign nationalities, in 2016 and 2017 in thousands of euros:

Country Number of foreigners in 2016 % of foreigners in 2016 Number of foreigners in 2017 % of foreigners in 2017
Angola12.7472,515.2552,5
Cape Verde31.2406,136.6266,1
Guinea Bissau13.6292,716.8852,8
Brazil89.75917,6116.45219,3
China22.27014,589.4324,1
India12.0634,424.5822,6
Germany16.7773,318.8663,1
Spain47.9629,454.7499,1
France24.6124,829.6484,9
United Kingdom21.7784,323.3503,9
Romania31.0336,133.1575,5

OM’s study is very detailed in this theme and deserves reading of its entire content, because it also brings information about the level of study of immigrants, the volume of validated diplomas, whose Brazilian doctors have a great weight, deals with birth rates and how important they are, among other topics.

5. Immigration in Portugal: mainly labour and active

The report therefore concludes that the continuation of the positive values of the financial balances of the Portuguese welfare system with foreigners also reinforces the conclusion that immigration in Portugal is essentially labour-intensive and active, totally contradicting the argument of some European countries that immigration has imminent objectives of maximising public support and thus eroding the public accounts of host societies.

If Portugal did not continue with its policy of receiving foreigners in 40 years’ time, it could extinguish up to 30% of its population – this is stated in the report itself.

Thus, it is noted that economically productive and, inherently, contributory immigrants will be increasingly necessary to lead to the balance of the Portuguese Welfare System, and the Brazilian resident has relevant importance in this economic and social context in the current balance of this country’s accounts.

Portuguese nationality or residence visa? See what’s best for you.

Article published on the Euro Tips website: https://www.eurodicas.com.br/equilibrio-do-sistema-previdenciario-portugues/

Author: Verenna Melo
Social Security and Tax Consulting

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