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Migration, Taxation and Inequality

Blanca Moreno-Dodson's picture

Have you ever thought of international migration as being closely intertwined with issues of taxation, public welfare and inequality? That is actually the case both in home and destination countries.

What are the issues in home countries?  On the one hand, the emigration of workers, especially high-skilled workers, is often perceived to create a fiscal loss due to the cost of educating these workers and foregone tax revenues which may reduce the fiscal resources available for income redistribution.  On the other hand, remittances, when well spent, can create multiplier effects and contribute to increasing domestic demand and growth, as well as increasing tax collections.

What about destination countries? Immigration raises other challenges, especially when poor and undocumented workers are perceived as taking more from the government budget in the form of social welfare and health care benefits than what they contribute in the form of tax revenues.

We encourage you to take a look at “Migration, Taxation and Inequality,” a recent addition to the Economic Premise series, which discusses some of the current issues around migration and taxation including how to compensate home countries for the fiscal losses of high-skilled emigration, how to bring immigrants into the tax system and make them net contributors, whether or not to tax inward, cross-border remittances, and designing appropriate tax incentives to encourage diaspora investment in the home country.