European Commission Seeks Input on Tax Issues of Cross-Border Citizens

The European Commission is seeking consultation through 3 June 2014 on the problems faced by "cross-border citizens."  They desire input from "[a]ll stakeholders – citizens, EU countries, tax administrations, governmental and business organisations, tax practitioners and academics." Some background:

Individuals exercising cross-border activities within the EU are often confronted with different/ additional tax issues compared to individuals who are active only within a single EU country. The issues that can arise may include complex administrative procedures in one or both countries involved that make tax compliance difficult; language barriers; different interpretations of tax treaties by the EU countries involved; difficulties in accessing relevant tax information; and difficulties in identifying officials responsible in national tax administrations. The problems often stem from the fact that two or more EU countries may have the right to tax the income in a cross-border case. Even if procedures exist in theory to prevent double or multiple taxation, the application of those procedures may be very complicated in practice. 

Some EU countries have adopted measures to address these cross-border tax problems. ... 

Although these measures are good, more may need to be done and other countries may still need to take steps in this direction. 

The Commission services are launching this public consultation with a view to inviting all interested parties to contribute to the exercise of providing information on current problems and identifying good practices applied by some EU tax administrations that go some way towards addressing these problems. This will allow the Commission to come up with solutions such as to recommend that all EU countries adopt certain good practices.

You can find links for various types of submissions at the link above.

My favorite part: "Received contributions will be published on the Internet." Yes! Very frustrating when a public consultation ends in the deafening silence of black box decsion-making based on undisclosed inputs. By making this truly public, the EC is providing a data source for researchers that could lead to more creative thinking in the long run. Lessons about the impact of tax issues on intra-European activity from this consultation might help inform our thinking about the taxation of cross border citizens more generally.

Razin on Tax and Migration Competition

Assaf Razin and Efraim Sadka have a new paper up on NBER called Migration into the Welfare State, in which they survey the literature on the tax burden of migration and work with available migration and tax policy data to make some assertions about how taxation impacts inward and outward migration.  From the abstract in the paper:

We develop a stylised EU-type model of rich capital-abundant (and productive) countries and poor capital-scarce countries in order to explain a key feature of tax policies and inter- and intra-migration flows. We examine how this model can explain the differences in the tax rates and the generosity of the welfare state, on the one hand, and migration flows, on the other hand, between rich and poor countries, within a union and from the rest of the world. An upward-slopping supply of migrants from outside the union and the relatively low endowment of capital of these migrants gives rise to a fiscal externality.

The jargon-heavy style of this abstract continues through the paper and I cannot say that I really understand some of the arguments. Razin and Sadka seem to conclude that under conditions of tax competition (for example, involving migration from countries outside of the EU), rich countries let in too many immigrants, offer them too many social benefits, and levy too high a tax on capital (which immigrants don't typically pay) to pay for it all, while coordination fixes things (although confusingly the papers seems to suggest that coordination brings down capital gains taxes but intensifies migration flows, so I am not sure). Unfortunately this paper requires too much deciphering and parsing work by the reader (an all-too-common phenomenon with academic papers) and at this time of year there is little hope for that.

A plea to academic authors who write papers on tax topics especially (and a reminder to myself when I look at my own writing): readers need a clear and succinct summary, written in plain, jargon-free language, to help them summon the desire and the mental energy to work through a paper. The more complex and data-filled the paper, the more a return to Zinsser is to be recommended.

Employee Mobility & Assignments Abroad-Conference at McGill Law-May 29

The Canadian Tax Foundation will host a conference at McGIll Law next Wednesday on the (timely!) topic of taxing workers when they go abroad. Eminent McGill law grad and former McGill chancellor Richard Pound will deliver the lunchtime address. Info below and on the CTF website.

Employee Mobility - Assignments Abroad 

Wednesday, May 29, 2013 

8:45 a.m.  –  4:45 p.m.

Followed by a cocktail reception sponsored by Stikeman Elliott 

McGill University, Faculty of Law
3660 Peel Street (library entrance)
Montréal

[Register online] [Registration form - PDF]

This year, the theme for the Canadian Tax Foundation’s annual Journée d’études fiscales, is employee foreign assignments. Speakers at this conference will be discussing the various taxation considerations which arise, both from the perspective of the employee and of the employer, when Canadians choose to temporarily or permanently move their place of work abroad. Various aspects of taxation will be analyzed during the course of the day by experts in the field.

Click here for program & registration info.

After the cocktail, stick around for a Roundtable on Tax Justice, info here and more to come soon.

To understand why citizenship-based taxation is objectionable, consider the STEM Jobs Act of 2012

Victoria Ferauge explains in as clear a way as may be possible why it is important to understand what people mean when they talk about citizenship-based taxation, and why the US effort to impose it with the big stick of FATCA is so objectionable to Americans living in other countries (also known as "immigrants" in those countries). She makes a number of points but I wanted to highlight one here:

In the [dialectic on Americans living abroad, which equates expatriation with tax evasion] it seems not to have occurred to the American public or its lawmakers that the people they are trying to attract [through immigration policies aimed at high-skilled workers] are the product of other countries' investments in producing a well-educated populace. 

In light of that, consider what the Heritage Foundation says about the STEM Jobs Act of 2012:

American businesses are struggling to fill high-skilled employment opportunities. STEM jobs grew at over three times the pace of non-STEM jobs between 2000 and 2010 and are expected to grow almost twice as fast by 2018. Business groups have spent years urging Congress to reform the visa system in order to fill these empty positions.

Enhancing the ability of high-skilled workers to enter the U.S. would be an asset to the nation’s economy as well as its indebted government. 

In case the instrumentalist nature of our interest in immigrants is not clear, the point is we're going to make these foreign-born, foreign-raised, foreign-educated, now high-skilled, highly-paid workers a permanent part of the American taxpaying public, which can increasingly be defined as the American wage-earning public. One may be forgiven, perhaps, for juxtaposing this deep thirst for foreign talent against America's ongoing disinvestment in its own social infrastructure, including public education (also helped along by the Heritage Foundation).

Victoria's post thus seems to me to contain the contours for constructing the normative case for taxing humans. There is much to be done on this topic, but it seems clear that the practice of admitting immigrants at all, let alone actively seeking highly-skilled ones, demonstrates that inbound human mobility is a social good that states support; that inbound human mobility (perhaps especially of the high-skilled kind) may be the product of rather intense social investment by some other country; and that conversely taxing on the basis of citizenship regardless of residence is a means of preventing outbound human mobility and so runs strictly counter to the overall good of human mobility while also being hostile to the aims of other countries also seeking inbound labour.

The US has long objected to onerous fiscal controls on the capital it sends across borders, so it seems particularly difficult to understand the ongoing support for placing onerous fiscal controls on its outbound labour supply. Contextualize that observation within the story of the shift of taxation from capital to labour over the past 50 years, however, and a pragmatic explanation is easily ascertained. But pragmatism does not make the normative case. In fact, it violates the conventionally-understood major normative factors for assessing taxation--efficiency, administrability, and fairness--because it introduces an insurmountable amount of arbitrariness. This topic deserves much more thinking than has been allocated to it by tax policy observers, including myself.

There is much more at the link, please do go and read Victoria's whole post.